European Equity Markets and the EMU

During the 1980s, country effects were larger than industry effects in the equity markets of Western Europe. This phenomenon continued for the countries of the European Monetary Union in the 1993–98 period despite the convergence of interest rates and the harmonization of fiscal and monetary policies following the Maastricht Treaty of 1992. Today, no evidence supports the disappearance of differences between EMU countries' equity returns.