The Impact of Euro on Sectoral Equity Returns and Portfolio Risk |
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Authors: | Maher Asal |
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Institution: | 1.Department of Economics and Informatics,University West,Trollh?ttan,Sweden |
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Abstract: | This paper examines the implications of the adoption of the euro and the resulting monetary policy integration for investors
in the Euro area in terms of stock market diversification. In particular, we study the difference between investment strategies
based on country indices and on sector indices. In addition, we use GARCH-M to model return and volatility for the daily sectoral
euro equity indices from 1992 to 2009 to analyze how and to what extent volatility in the sector equity index is driven by
shocks occurring in the US, aggregate European equity index, aggregate Euro Zone equity index, and the global equity index.
We find strong evidence that diversification over sectors yields more efficient portfolios than diversification over countries
and that the volatility spillover of the aggregated Euro zone equity return index on the sectoral equity return index has
increased after the launch of the euro. |
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