An international integration history of the Zagreb Stock Exchange

Abstract

We investigate stock market co-movements among the Croatian and several other markets (in the US, UK, Germany, Austria, Poland, Czech Republic and Hungary) in the period from 3 September 1997 to 19 August 2016 with dynamic correlation coefficient models. This allows us to analyse long-term trends of the international financial integration of the Zagreb Stock Exchange in the last two decades as well as the separate impacts of major events that influenced financial markets during that period. Our results imply a relatively low level of international financial integration of the Croatian stock market, but some convergence in co-movement with the analysed markets over time is present. The strongest market co-movement is related to the subprime mortgage crisis, and EU accession seems to have made Croatian international integration less segmented.

Keywords

• stock market co-movement
• Croatian international financial integration
• dynamic correlation coefficient models