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Integration of stock markets in 1994 - 2010
Rudolfová, Iva ; Witzany, Jiří (advisor) ; Stádník, Bohumil (referee)
This thesis analyzes the interdependence of stock markets in the Czech Republic, Hungary, Germany and the U.S. between 1994 and 2010. Its aim is to prove or disprove the hypothesis that the correlation of stock markets is growing. Furthermore, it aims to determine whether the benefits of international diversification are important in the 21st century. The first part defines the basic terms related to this issue. The next section describes the historical development of stock markets and major stock indexes. The following is the longest chapter, which deals with the dependence of equity markets. The degree of dependence between markets is measured by correlation coefficients. In order to calculate the correlation coefficients 3 methods were used: 12-month, 24-month moving window and the exponential weighting. It was confirmed that correlation increases in periods of high market volatility and if the equity markets go up. Correlation decreases in periods of low market volatility and if the stock markets go down. There is a long-term increasing trend in the correlation development. The last chapter describes the recent study of P. Christoffersen, V. Errunza, K. Jacobs, and X. Jin, which also deals with this issue. Although the authors used more complex mathematical and statistical methods, their conclusions are similar. At the end of this chapter there is a study dealing with the benefits of international diversification in 2005 and 2009. Its conclusion is that the benefits of international diversification are disappearing.
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