Interdependence of Nordic and Baltic Stock Markets

Ulf Nielsson *Department of Economics, International Affairs Building, 118th Street and Amsterdam Avenue, NY, 10027, USA

Abstract: The interdependence of the Nordic and Baltic stock markets is explored in lightof increased merger activity of stock exchanges over the sample period, 1996–2006. Theresults show surprisingly little interdependence between the Nordic and Baltic stock indices.In the short run, the response of each market to a shock in another is insignificant.In the longer term there is limited evidence of integration and only weak indication ofconvergence within the sample period. The stock markets seem no more integrated thanthey were at the outset of recent merger activity, suggesting that the levels of cooperationbetween the Nordic and Baltic exchanges have not been deep enough to produce increasedinterdependence.

Keywords: Interdependence, integration, convergence, stock exchange merger, stock markets

JEL codes: F36, G15