European economic integration in the context of globalization

This paper examines the impact of European Integration in the context of globalization on correlations between stock market returns. Furthermore, it looks at the impact of globalization in periods of crisis on stock market correlations of developed nations of Europe, US and Japan. The methodology used is a simple calculation framework based on the correlation coefficient. The results show that stock market integration in Europe has increased substantially in recent years though it is not yet complete. Moreover, stock markets correlation between Europe,Japan and the US is stronger than ever and is likely to continue to grow. This is more noticeable for the NIKKEI index which recently is very clearly affected by the movement in other major markets. Equity portfolios on developed countries cannot be constructed on the basis of a country allocation strategy anymore.peer-reviewe