European Equity Market Integration and Optimal Investment Horizons – Evidence from Wavelet Analysis
Journal Title: Dynamic Econometric Models - Year 2010, Vol 10, Issue 1
Abstract
In the paper the process of equity market integration in Europe is examined from the wavelet perspective. The method applied is the Continuous Discrete Wavelet Transform that enables to perform global and local wavelet variance and correlation decompositions. In particular, questions about changes of the investment risk and the possibility of international portfolio diversification under different investment horizons are addressed. The study documents both convergence of the Central and Eastern European equity markets as well as their segmentation on the European market. The latter enables reduction of portfolio returns variability by an international portfolio diversification, especially for long investment horizons.
Authors and Affiliations
Joanna Bruzda
Keywords
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