Dynamics of Equity Market Integration in Europe: Evidence of Changes with Events and over Time

This paper examines the integration of European equity markets over 1985-2002 using a relatively new set of three dynamic techniques that measure the extent of timevarying equity market integration from complementary perspectives. All three techniques are in agreement that there has been an increased degree of integration among European equity markets especially since the 1997-98 period. This evidence shows that despite several years of demonstrating political willingness by European leaders to integrate their economies, it was not until the establishment of the EMU and the ECB during 1997-98 that the markets deemed that European integration would in fact occur. We also show that despite this increased integration, the European equity markets are still dominated by the US market and are in fact convergent towards this market rather than a common internal measure.