Greece’s Stock Market Integration with Southeast Europe

Abstract

This paper analyzes the time-varying integration of the Greek stock market from a regional perspective by using a conditional version of the international capital asset pricing model (ICAPM) allowing for dynamic changes in the degree of market integration, regional market currency risk, and local market risk. We show that the prices of risk are extremely sensitive to major international economic and political events such as the different monetary and financial crises in Asian and Latin American countries in 1997, 1998, and 2001. In addition, we show that the level of market openness and development of the stock market satisfactorily explain the time-varying degree of Greek stock market integration.