Stock Market Globalization: The Case of Emerging European Countries and the US

Abstract The paper uses a linear research design in order to investigate the globalization of returns between the US market and twelve Emerging European Countries (EEC) in the period 2005-2013. The objective of the study is to identify if there exists a significant relationship between co-movements of returns obtained in the US stock market and those obtained in the EEC markets. Towards this end, the study employs a Vector Error Correction Model (VECM) and a Granger Causality test assuming the relations between returns are of a linear manner. The results present statistically significant coefficients for the VECM model. Also, we fail to reject of the null hypothesis in the case of Granger causality test. Both findings advocate that between the US developed and the emerging stock markets exists a statistically significant degree of interconnection in terms of obtained returns.