European Financial Markets Tony F Southall European Financial Markets The Effects of European Union Membership on Central and Eastern European Equity Markets Physica-Verlag A Springer Company Tony F Southall Fröhlichstrasse 39 8008 Zürich Switzerland Tony_Southall@monitor.com ISBN 978-3-7908-2073-7 e-ISBN: 978-3-7908-2074-4 DOI: 10.1007/978-3-7908-2074-4 Library of Congress Control Number: 2008930209 © 2008 Physica-Verlag Heidelberg This work is subject to copyright All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer Violations are liable to prosecution under the German Copyright Law The use of general descriptive names, registered names, trademarks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use Cover design: WMXDesign GmbH, Heidelberg Printed on acid-free paper springer.com Abstract European Union (EU) accession involves both political and economic reforms which suggest changes with regard to financial markets This study contains empirical tests of four research questions relating to the effects of EU accession The initial question relates to effects on the level of integration between equity markets in European transition economies and those in global as well as European economies The second research question explores changes in the level of influence of global and local macroeconomic factors on equity market performance The last two questions explore the impact of EU accession on equity market volatility and return levels The study is based on data samples taken from eight markets which accessed the EU in May 2004 The study provides evidence of a significant increase in the level of equity market integration, measured by co-movement between equity indices in transition economies and global reference indices This implies that while successful market liberalisation involves an increase in the level of co-movement, as is concluded in existing academic research, further equity market co-movement can be expected as a result of EU accession With regard to the co-movement with European reference indices, the results of the study suggest that increases occur at stages prior to the actual EU accession announcement and that no statistically significant change occurs in association with EU accession The study also provides evidence suggesting that the influence of macroeconomic factors shifts from local to global factors in association with the EU accession Global factors demonstrate a significant increase in explanatory power after the accession, while a corresponding decline is found for local factors Finally, the study provides evidence of a significant decline in equity market volatility coupled with limited changes in the return levels in most markets This implies that while there is only some evidence of changes in the return levels which are not adjusted for risk, there is clear evidence of increasing risk-adjusted returns in association with EU accession v About the Author Tony Southall is a strategy consultant with Monitor Group Since 1999, Tony has served global clients across Europe, the Middle East and Africa on topics relating to corporate strategy, acquisition and divestiture support, post-merger integration, marketing and operational improvement More recently, Tony focuses on serving investment companies and other clients in emerging markets Tony received his Ph.D in Economics from the University of St Gallen He also holds an M.Sc in Finance from the Stockholm School of Economics and a CEMS M.Sc in International Management from the Stockholm School of Economics and the HEC School of Management Paris vii Contents Abstract v About the Author vii List of Figures xiii List of Tables xv Introduction 1.1 1.2 1.3 1.4 Context of Study Scope of Study Contribution of Study Definition of Key Terms 1.4.1 Definition of European Transition Economies 1.4.2 Definition of European Union Membership 1.4.3 Definition of Effects on Equity Markets Structure of Study 6 Literature Review 11 2.1 11 12 1.5 2.2 2.3 2.4 Performance Characteristics of Emerging Markets 2.1.1 Return and Volatility Characteristics 2.1.2 Co-movement Between Emerging Markets and World Markets Market Integration 2.2.1 Distinguishing Between Market Integration and Market Liberalisation 2.2.2 Theory of Market Integration 2.2.3 Empirical Market Integration Research Regional Market Integration 2.3.1 Welfare Effects of Regional Market Integration 2.3.2 Market Integration Effects of the EU Enlargement Market Integration and Corporate Governance 13 15 16 16 19 24 25 26 27 ix x Contents 2.4.1 2.5 28 29 31 3.1 32 34 EU Accession and Equity Market Integration 3.1.1 Impact of EU Accession on Level of Co-movement 3.1.2 Impact of EU Accession on Influence by Macroeconomic Factors EU Accession and Equity Market Performance 3.2.1 Impact of EU Accession on Equity Market Volatility 3.2.2 Impact of EU Accession on Equity Market Returns Concluding Remarks on Research Questions and Hypotheses 34 36 37 40 43 Methodology 45 4.1 45 46 3.3 Impact of EU Accession on Level of Integration 4.1.1 Co-movement of Equity Market Returns 4.1.2 Influence of Global and Local Macroeconomic Factors Impact of EU Accession on Performance 4.2.1 Impact of EU Accession on Equity Market Volatility 4.2.2 Impact of EU Accession on Equity Market Return Concluding Remarks on Methodology 49 55 55 57 60 Review of Empirical Data 61 5.1 61 4.2 4.3 27 Definition of Research Questions and Hypotheses 3.2 Theoretical Link Between Corporate Governance and Asset Pricing 2.4.2 Empirical Evidence Linking Governance and Asset Pricing Concluding Remarks on Literature Review 5.2 5.3 Review of Qualitative Information and Data 5.1.1 Liberalisation of Eastern European Financial Markets 5.1.2 Initiation of Equity Trading in European Transition Economies 5.1.3 EU Accession Process of Eastern European Economies Review of Quantitative Data Samples 5.2.1 Market Return Data for European Transition Economies 5.2.2 Return Data on Global and European Indices 5.2.3 Data on Global and Local Macroeconomic Factors 5.2.4 Deposit Rates for Calculation of Risk-Adjusted Return Measure Concluding Remarks on Empirical Data Review 62 63 64 68 68 85 86 92 93 Contents Findings and Discussion 6.1 95 Findings on Impact of EU Accession on Equity Market Integration 6.1.1 Findings on Change in Co-movement Between Local and Global Indices 6.1.2 Findings on Change in Level of Influence of Macroeconomic Factors Findings on Impact of EU Accession on Equity Market Performance 6.2.1 Findings on Impact of EU Accession on Equity Market Volatility 6.2.2 Findings on Impact of EU Accession on Return Levels Concluding Remarks on Findings and Discussion 135 143 Conclusions 145 7.1 146 6.2 6.3 xi 95 95 106 128 128 Interpretation of Results 7.1.1 EU Accession and Level of Co-movement of Equity Returns 7.1.2 EU Accession and Influence of Macroeconomic Factors on Equity Returns 7.1.3 EU Accession and Equity Market Volatility and Return Limitations of Study 7.2.1 Limitations Related to Data Samples 7.2.2 Limitations Related to Research Methodology Contributions and Implications of Research 7.3.1 Contribution to Academia 7.3.2 Contribution to Practice Further Research Concluding Remarks 152 153 153 154 155 155 156 157 158 References 159 Appendix 165 Appendix Index Constituents by Market as of End of Year 2005 Appendix Detailed Sovereign Credit Rating Data Appendix Exchange Rates Applied in the Analysis Appendix Rolling 26-Week Correlation Coefficients of Global and Local Equity Market Indices Appendix List of Abbreviations Applied in Text Appendix List of Variable Acronyms 165 171 173 7.2 7.3 7.4 7.5 146 148 176 184 185 List of Figures Figure 1.1 Figure 1.2 Delimitations of study Recent and potential EU candidates Figure 3.1 Average long-term sovereign credit ratings for the eight European transition economies, January 1996–July 2006 Overview of research area 39 43 Figure 3.2 Figure 5.1 Figure 5.2 Figure 5.3 Figure 5.4 Figure 5.5 Figure 6.1 Figure 6.2 Figure 6.3 Figure 6.4 Figure 6.5 Figure 6.6 Figure 6.7 Figure 6.8 Histogram of Slovenian weekly market returns prior to accession announcement based on local currencies Closing values of MSCI World and selected FTSE indices Average deposit rates for Hungary, Poland and the Czech Republic Average deposit rates for Lithuania, Latvia and Estonia Average deposit rates for Slovenia and the Slovak Republic Mean correlation coefficient between the MSCI World and the local equity market indices Mean correlation coefficient between the FTSEurofirst 300 Eurozone and the local equity market indices Mean correlation coefficient between the FTSE EuroMid Eurozone and the local equity market indices Rolling 26-week standard deviation of equity market returns in Poland, Hungary and the Czech Republic Rolling 26-week standard deviation of equity index returns in Lithuania, Latvia and Estonia Rolling 26-week standard deviation of equity index returns in Slovenia and the Slovak Republic Polish equity index – weekly closing values indexed to 100 as of January 1996 Hungarian equity index – weekly closing values indexed to 100 as of January 1996 82 85 92 92 92 102 102 102 129 130 130 135 135 xiii 0.10 USD / EEK EUR / EEK 0.08 0.06 0.04 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 3F USD and EUR per Estonian Kroon Source: Oanda 0.0100 USD / SIT EUR / SIT 0.0075 0.0050 0.0025 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 3G USD and EUR per Slovenian Tolar Source: Oanda 0.04 USD / SKK EUR / SKK 0.03 0.02 0.01 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 3H USD and EUR per Slovak Koruna Source: Oanda 2.00 USD / LVL EUR / LVL 1.80 1.60 1.40 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 3E USD and EUR per Latvian Lats Source: Oanda Appendix Rolling 26-Week Correlation Coefficients of Global and Local Equity Market Indices 1.00 Correlation Coefficient: MSCI World Index - Equity Market Index Poland 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSEurofirst 300 Eurozone Index - Equity Market Index Poland 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSE EuroMid Eurozone Index - Equity Market Index Poland 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 4A Poland Notes: Correlation coefficients are recalculated on a weekly basis based on a rolling 26-week time horizon Source: Correlation coefficients are calculated based on data from Bloomberg Appendix 177 1.00 Correlation Coefficient: MSCI World Index - Equity Market Index Hungary 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSEurofirst 300 Eurozone Index - Equity Market Index Hungary 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSE EuroMid Eurozone Index - Equity Market Index Hungary 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 4B Hungary Notes: Correlation coefficients are recalculated on a weekly basis based on a rolling 26-week time horizon Source: Correlation coefficients are calculated based on data from Bloomberg 178 Appendix 1.00 Correlation Coefficient: MSCI World Index - Equity Market Index Czech Rep 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSEurofirst 300 Eurozone Index - Equity Market Index Czech Rep 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSE EuroMid Eurozone Index - Equity Market Index Czech Rep 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 4C Czech Republic Notes: Correlation coefficients are recalculated on a weekly basis based on a rolling 26-week time horizon Source: Correlation coefficients are calculated based on data from Bloomberg Appendix 179 1.00 Correlation Coefficient: MSCI World Index - Equity Market Index Lithuania 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSEurofirst 300 Eurozone Index - Equity Market Index Lithuania 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSE EuroMid Eurozone Index - Equity Market Index Lithuania 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 4D Lithuania Notes: Correlation coefficients are recalculated on a weekly basis based on a rolling 26-week time horizon Source: Correlation coefficients are calculated based on data from Bloomberg 180 Appendix 1.00 Correlation Coefficient: MSCI World Index - Equity Market Index Latvia 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSEurofirst 300 Eurozone Index - Equity Market Index Latvia 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSE EuroMid Eurozone Index - Equity Market Index Latvia 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 4E Latvia Notes: Correlation coefficients are recalculated on a weekly basis based on a rolling 26-week time horizon Source: Correlation coefficients are calculated based on data from Bloomberg Appendix 181 1.00 Correlation Coefficient: MSCI World Index - Equity Market Index Estonia 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSEurofirst 300 Eurozone Index - Equity Market Index Estonia 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSE EuroMid Eurozone Index - Equity Market Index Estonia 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 4F Estonia Notes: Correlation coefficients are recalculated on a weekly basis based on a rolling 26-week time horizon Source: Correlation coefficients are calculated based on data from Bloomberg 182 Appendix 1.00 Correlation Coefficient: MSCI World Index - Equity Market Index Slovenia 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSEurofirst 300 Eurozone Index - Equity Market Index Slovenia 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSE EuroMid Eurozone Index - Equity Market Index Slovenia 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 4G Slovenia Notes: Correlation coefficients are recalculated on a weekly basis based on a rolling 26-week time horizon Source: Correlation coefficients are calculated based on data from Bloomberg Appendix 183 1.00 Correlation Coefficient: MSCI World Index - Equity Market Index Slovak Rep 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSEurofirst 300 Eurozone Index - Equity Market Index Slovak Rep 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 1.00 Correlation Coefficient: FTSE EuroMid Eurozone Index - Equity Market Index Slovak Rep 0.50 0.00 (0.50) Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Appendix 4H Slovak Republic Notes: Correlation coefficients are recalculated on a weekly basis based on a rolling 26-week time horizon Source: Correlation coefficients are calculated based on data from Bloomberg Appendix ADR APT BSE BSSE CAPM CPI DEM Dec DW D1 EEA EFTA EMDB EMU EU EUR EU15 FDI g GDP GNP ICRG ICT IFC IMF Jan Jun k LJSE ln Max Min MNC MSCI N OECD Post Ann Pre Ann PSE r List of Abbreviations Applied in Text American Depositary Receipts Arbitrage Pricing Theory Budapest Stock Exchange Bratislava Stock Exchange Capital Asset Pricing Model Harmonised Consumer Price Index; German Marks December Durbin-Watson Statistic Dividend in Period European Economic Area European Free Trade Area Emerging Market Database European Monetary Union European Union Euro 15 Member States of the EU before the Enlargement of May 2004 Foreign Direct Investment Expected Annual Dividend Growth Rate Gross Domestic Product Gross National Product International Country Risk Guide Information and Communication Technology International Finance Corporation International Monetary Fund January June Required Rate of Risk-Adjusted Return for an Asset Ljubljana Stock Exchange Natural Logarithm Maximum Minimum Multinational Corporation Morgan Stanley Capital International Number; NA / n.a Not Available Organisation for Economic Co-operation and Development Post-Announcement; Pre-Announcement Prague Stock Exchange Pearson’s Correlation Coefficient Appendix r′ Rep RFR RIA Std dev S&P -bills US USD WSE 185 Transformed Correlation Coefficient as per Fisher’s z-transformation Republic Risk Free Rate of Interest Regional Market Integration Agreements Standard Deviation Standard & Poor’s Treasury Bills United States of America United States Dollar Warsaw Stock Exchange; Appendix List of Variable Acronyms Appendix 6A Acronyms related to independent global macroeconomic variables Acronym: Eonomic Factor Time Period BCOMMPR Commodity price change BINDPRD Change in industry production BOILPRIC Oil price change BUSINT US interest rate BWLDCPI Inflation rate BWLDRET Equity return rate ACOMMPR Commodity price change AINDPRD Change in industry production AOILPRIC Oil price change AUSINT US interest rate AWLDCPI Inflation rate AWLDRET Equity return rate Notes: Ann refers to Announcement of EU accession Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Economic Factor Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance BCZINT BCZINFL BCZINPR BCZMOSU BCZTRBA BCZEXCH BESINT BESINFL BESINPR BESMOSU BESTRBA BESEXCH BHUINT BHUINFL BHUINPR BHUMOSU BHUTRBA BHUEXCH BLAINT BLAINFL BLAINPR BLAMOSU BLATRBA BLAEXCH BLIINT BLIINFL BLIINPR BLIMOSU BLITRBA Czech Rep Czech Rep Czech Rep Czech Rep Czech Rep Czech Rep Estonia Estonia Estonia Estonia Estonia Estonia Hungary Hungary Hungary Hungary Hungary Hungary Latvia Latvia Latvia Latvia Latvia Latvia Lithuania Lithuania Lithuania Lithuania Lithuania Market Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Time Period Appendix 6B Acronyms related to independent local macroeconomic variables Acronym ACZINT ACZINFL ACZINPR ACZMOSU ACZTRBA ACZEXCH AESINT AESINFL AESINPR AESMOSU AESTRBA AESEXCH AHUINT AHUINFL AHUINPR AHUMOSU AHUTRBA AHUEXCH ALAINT ALAINFL ALAINPR ALAMOSU ALATRBA ALAEXCH ALIINT ALIINFL ALIINPR ALIMOSU ALITRBA Variable Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Economic Factor Czech Rep Czech Rep Czech Rep Czech Rep Czech Rep Czech Rep Estonia Estonia Estonia Estonia Estonia Estonia Hungary Hungary Hungary Hungary Hungary Hungary Latvia Latvia Latvia Latvia Latvia Latvia Lithuania Lithuania Lithuania Lithuania Lithuania Market Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Time Period 186 Appendix Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Lithuania Poland Poland Poland Poland Poland Poland Slovak Rep Slovak Rep Slovak Rep Slovak Rep Slovak Rep Slovak Rep Slovenia Slovenia Slovenia Slovenia Slovenia Slovenia Notes: Ann refers to Announcement of EU accession Industrial Prod refers to industrial production BLIEXCH BPLINT BPLINFL BPLINPR BPLMOSU BPLTRBA BPLEXCH BSKINT BSKINFL BSKINPR BSKMOSU BSKTRBA BSKEXCH BSNINT BSNINFL BSNINPR BSNMOSU BSNTRBA BSNEXCH Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann ALIEXCH APLINT APLINFL APLINPR APLMOSU APLTRBA APLEXCH ASKINT ASKINFL ASKINPR ASKMOSU ASKTRBA ASKEXCH ASNINT ASNINFL ASNINPR ASNMOSU ASNTRBA ASNEXCH Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Interest rate Inflation Industrial prod Money supply Trade balance Exchange rate Lithuania Poland Poland Poland Poland Poland Poland Slovak Rep Slovak Rep Slovak Rep Slovak Rep Slovak Rep Slovak Rep Slovenia Slovenia Slovenia Slovenia Slovenia Slovenia Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Appendix 187 188 Appendix Appendix 6C Acronyms related to dependent return variables in regression models Acronym Market Time Period Currency BCZRTLC Czech Rep BESRTLC Estonia BHURTLC Hungary BLARTLC Latvia BLIRTLC Lithuania BPLRTLC Poland BSKRTLC Slovak Rep BSNRTLC Slovenia ACZRTLC Czech Rep AESRTLC Estonia AHURTLC Hungary ALARTLC Latvia ALIRTLC Lithuania APLRTLC Poland ASKRTLC Slovak Rep ASNRTLC Slovenia Notes: Ann refers to Announcement of EU accession Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Pre Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Post Ann Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local Appendix 6D Acronyms related to market volatility and return tests Acronym Market Time Period Currency PLPRANLC PLPOANLC HUPRANLC HUPOANLC CZPRANLC CZPOANLC LTPRANLC LTPOANLC LVPRANLC LVPOANLC ESPRANLC ESPOANLC SVPRANLC SVPOANLC SKPRANLC SKPOANLC ALPRANLC ALPOANLC PLPRANUS PLPOANUS HUPRANUS HUPOANUS CZPRANUS CZPOANUS LTPRANUS LTPOANUS Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local Local USD USD USD USD USD USD USD USD Poland Poland Hungary Hungary Czech Rep Czech Rep Lithuania Lithuania Latvia Latvia Estonia Estonia Slovenia Slovenia Slovak Rep Slovak Rep All Markets All Markets Poland Poland Hungary Hungary Czech Rep Czech Rep Lithuania Lithuania Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann Pre Ann Post Ann (continued) Appendix Appendix 6D (continued) Acronym Market 189 Time Period LVPRANUS Latvia Pre Ann LVPOANUS Latvia Post Ann ESPRANUS Estonia Pre Ann ESPOANUS Estonia Post Ann SVPRANUS Slovenia Pre Ann SVPOANUS Slovenia Post Ann SKPRANUS Slovak Rep Pre Ann SKPOANUS Slovak Rep Post Ann ALPRANUS All Markets Pre Ann ALPOANUS All Markets Post Ann Notes: Ann refers to Announcement of EU Accession Currency USD USD USD USD USD USD USD USD USD USD .. .European Financial Markets Tony F Southall European Financial Markets The Effects of European Union Membership on Central and Eastern European Equity Markets Physica-Verlag... understanding of market integration processes in the context of financial markets in European transition economies T Southall, European Financial Markets, © 2008 Physica-Verlag Heidelberg Introduction... Liberalisation of Eastern European Financial Markets 5.1.2 Initiation of Equity Trading in European Transition Economies 5.1.3 EU Accession Process of Eastern European Economies