Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259859 
Authors: 
Year of Publication: 
2002
Series/Report no.: 
Working Paper No. 2002:4
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
This paper uses a multivariate regime-switching framework to investigate and endogenously date changes in return characteristics on the four largest Nordic stock markets. We find that the deregulated time-period, specifically after 1982, is associated with higher expected return, higher volatility, stronger links with international stock markets and higher correlation between the Nordic stock markets. This higher correlation is mainly driven by common higher correlation with international stock returns and not by higher correlation between country specific components of return. Further, our evidence support the argument that market liberalization creates excess volatility but also that Nordic investors are more than compensated for this by higher expected returns and the opportunity to cross-border diversification after liberalization.
Subjects: 
stock market liberalization
excess volatility
portfolio diversification
multivariate regime-switching models
simulated annealing
JEL: 
C15
F36
G15
G18
Document Type: 
Working Paper

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