The dynamics of EMU stock market cycles before and after the euro

The effects of the introduction of the euro were expected not only on the real convergence of economies but also on stock markets. This paper compares the dynamics and synchronization of stock markets regimes in European markets before and after the launch of the euro. The results show that countries of the euro zone have different dynamics concerning the switching between bull and bear markets. However, after the introduction of the single currency, the differences have become less pronounced. The results delineate a framework of a core-periphery of stock markets, i.e., a large group of stock markets that share the same market regime, and some stock markets on the periphery, characterized by a distinctive behavior. Stock markets in the core group show a high level of synchronization of cycles, while countries on the periphery distinguish themselves by having low synchronization with the markets in the core group. JEL classification: G15, F30