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A Copula Approach to Analyzing the Dependence Structure of European Stock Markets

Burcu Ucer, Evrim Turgutlu


This paper examines the dependence structure between the stock markets of the six new members (Czech Republic, Hungary, Poland, Slovak Republic, Bulgaria, Romania), two candidate countries (Croatia and Turkey) and the European Union using a copula approach. Since the new members and candidate countries have close trade relations with the EU countries, we expect that financial market dependence have been also established between them. We also analyze their dependence with the USA since it is one of the major global investors and these countries have close financial ties with the USA. The main advantage of the copula approach is that it considers the excess co-movements in different markets hence, provides information about both the level and structure of dependence, different from the conventional methods. Overall, our findings indicate that by using copula models, one can reveal broader and more precise information about the financial integration within the EU and encourage the application of this method in similar studies.


Copula, dependence, chi-square test, European Union, financial integration

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