بررسی تحولات ارتباطات بازارهای سهام در اروپا از طریق حداقل درخت پوشا

The concept of a minimum spanning tree (MST) is used to study the process of comovements for 21 European Union stock market indices. We show how the minimum spanning tree and its related hierarchical tree evolve over time and describe the dynamics. Over the period studied, 1999–2006, the French equity market provides the main linkages in the system. The 2004 Accession states are more loosely connected to the other markets; they form two groupings, with the Czech Republic, Hungary, and Poland having tighter links to the main markets than the remaining Accession markets. Shorter distances between markets indicate a potential reduction of the benefits of international portfolio diversification in European markets, with the possible exception of those markets at the outer limits of the MST.

The evolution of the European Union (EU) over the last decade has been marked by such major events as the establishment of the European Monetary Union (EMU), with the introduction of the euro as the single currency for twelve of the EU member states, and an expansion of EU membership in 2004 to include ten new countries, primarily Central and Eastern European (CEE) states. An additional two countries, Romania and Bulgaria, joined the EU at the start of 2007, while Slovenia (2007) and Malta (2008) have adopted the euro. This process of closer economic and financial cooperation has led to increasing levels of financial market integration in the area, as documented in an extensive literature, surveyed in several review studies [1] and [2]. The effects of these developments on comovements in financial markets are of great importance not only to policymakers but also to investors, because of their potential to affect international asset allocation decisions and diversification benefits. Specifically, the attractiveness of international portfolio diversification will weaken as returns are equalized across countries [3] and [4]. The present research examines possible effects on the benefits of international portfolio diversification across EU equity markets of both “old” members and “new” Accession countries during the 1999–2006 period. We use a method introduced into the physics literature by Mantegna [5], known as Minimum Spanning Tree (MST) analysis, to examine the extent and evolution of comovements between these EU equity markets. Based on graphing theory, MST analysis provides a parsimonious representation of the network of correlations between markets and is particularly suitable for extracting the most important information concerning linkages when a large number of markets is under examination. A dynamic application allows us to identify the evolution of the patterns of the most important connections between EU equity markets and to examine a number of questions concerning their interrelationships. Which are the “core” EU equity markets? Have equity market comovements increased substantially due to closer harmonization of economic and fiscal policies associated with the creation of the EMU? What patterns of linkages can be observed for the Accession members’ equity markets? Our results indicate increased comovements, identify France rather than Germany as the core market, and describe distinct patterns of linkages of the new members’ equity markets. The paper is organized as follows. Section 2 provides a literature review of the MST methodology, which is discussed in Section 3. The data are described in Section 4. Results are presented in Section 5 and the conclusions in Section 6.

The MST methodology provides a parsimonious way to examine patterns of linkages between different markets. Applied dynamically, it reveals both consistencies and evolutions in relationships between markets over time. This analysis has allowed us to identify France as the most central market in the system. A small group of “old” EU markets, sharing high levels of development and/or close geographical proximity, has consistently constituted the most tightly linked set of markets. The CEE Accession countries as a group have organized into a pattern of linkage to the older EU markets via Austria post-May 2004. Within that structure they have also been shown to exhibit a persistent tendency to break down into two groupings; the markets of the Czech Republic, Hungary, and Poland have a higher level of comovement with other EU members, while Estonia, Latvia, and Slovenia, along with Cyprus, remain on the fringes of the system. The overall tendency of mean distances in the MST to decrease over time, along with decreasing dispersion, reveals an increase in comovements of these markets. The implication is a likely reduction of country diversification benefits for investors in EU equity markets. Our methodology does, however, also indicate those markets which are the last to link to the core markets. Such markets present a potential for relatively higher diversification benefits within the EU countries.