27/10/2006 14:03
The Common CSE-ASE Platform is expected to affect positively the investing public and economy in general, the University of Cyprus Economic Research Unit supports. According to a study signed by Panos Pasiardis and Christos Savva, the common platform will lead towards a convergence between the CSE and the international and European stock exchanges and will be beneficial for investors since they will be able to change their portfolio easier. More than that, the companies will be able to absorb capital in a larger and more effective market, where the share prices reflect the fundamental elements of the businesses and economy. It is estimated that the launch of the common platform is a development towards the right direction, which will enable the CSE to play an important role and facilitate a more effective distribution of investments in economy.
Correlation
The University of Cyprus researchers recorded the correlations among the yields in the ASE, the CSE and the large stock exchanges (UK, France and Germany) for the period from September 3, 2006. The index of correlation shows how the yields in a stock exchange (high or low) are connected with the yields in another. The closer the index is to 1, the more the yields move towards the same direction.
On the other hand, if the index is close to zero, the yields of the two stock exchanges have similar fluctuations.
The correlation among the European stock exchanges is strong, while the correlation between the ASE and the big European stock markets is not that strong. The correlation between the CSE and the ASE is even weaker while the correlation of the CSE with the European stock exchanges is almost inexistent.
According to the study, the price fluctuation in the ASE is bigger than that of other European stock markets. The price fluctuation in the CSE is even bigger. This is probably linked to the small size of the Cyprus market.
The researchers believe that one of the main reasons that affect the course of the stock markets is the behaviour of the investing public. In countries with developed stock exchanges and “mature” investing public, the fiscal and monetary policy, the condition of economy and the world phenomena (wars, natural distractions etc) affect the investor’s decision. This affect is common to all big EU member states, since their economies have similar structure and operate in a single market and single monetary policy regime.
Impacts
According to the study, the common platform will bring about changes in the CSE. It is obvious that the number of shares will increase and investors will have a wider range of choices. This together with the investors’ confidence to the CSE procedures and the trading in a larger and more effective market is expected to stabilize the share prices.
As for the yields, the low correlation between the CSE and the European stock markets is attributable to the fact that investors in Cyprus act in isolation in the restricted size of the island’s economy. “In such a small market, the price of shares is easily affected by ‘psychological’ factors and less affected by information and facts that reflect the long-term profitability of the companies”, it reported.
The Common Platform is expected to lead to a closer correlation between the CSE and the ASE and a subsequent closer correlation between the CSE and the European stock markets. Despite the fact that the ASE does not reflect fully the world politico-economic facts, its closer correlation with the European stock exchanges will bring the CSE closer to the international politico-economic developments.
On the other hand, some might say that the Common Platform might affect negatively the Cypriot investors, since the closer correlation of the two stock markets might restrict the ‘risk offset’ with the transfer of investments from the one stock exchange to the other. Such negative repercussions are obviously theoretical, since the dispersion of risk with the transfer of investments from the one stock exchange to the other is a practice that most Cypriot investors do not follow.
Correlation
The University of Cyprus researchers recorded the correlations among the yields in the ASE, the CSE and the large stock exchanges (UK, France and Germany) for the period from September 3, 2006. The index of correlation shows how the yields in a stock exchange (high or low) are connected with the yields in another. The closer the index is to 1, the more the yields move towards the same direction.
On the other hand, if the index is close to zero, the yields of the two stock exchanges have similar fluctuations.
The correlation among the European stock exchanges is strong, while the correlation between the ASE and the big European stock markets is not that strong. The correlation between the CSE and the ASE is even weaker while the correlation of the CSE with the European stock exchanges is almost inexistent.
According to the study, the price fluctuation in the ASE is bigger than that of other European stock markets. The price fluctuation in the CSE is even bigger. This is probably linked to the small size of the Cyprus market.
The researchers believe that one of the main reasons that affect the course of the stock markets is the behaviour of the investing public. In countries with developed stock exchanges and “mature” investing public, the fiscal and monetary policy, the condition of economy and the world phenomena (wars, natural distractions etc) affect the investor’s decision. This affect is common to all big EU member states, since their economies have similar structure and operate in a single market and single monetary policy regime.
Impacts
According to the study, the common platform will bring about changes in the CSE. It is obvious that the number of shares will increase and investors will have a wider range of choices. This together with the investors’ confidence to the CSE procedures and the trading in a larger and more effective market is expected to stabilize the share prices.
As for the yields, the low correlation between the CSE and the European stock markets is attributable to the fact that investors in Cyprus act in isolation in the restricted size of the island’s economy. “In such a small market, the price of shares is easily affected by ‘psychological’ factors and less affected by information and facts that reflect the long-term profitability of the companies”, it reported.
The Common Platform is expected to lead to a closer correlation between the CSE and the ASE and a subsequent closer correlation between the CSE and the European stock markets. Despite the fact that the ASE does not reflect fully the world politico-economic facts, its closer correlation with the European stock exchanges will bring the CSE closer to the international politico-economic developments.
On the other hand, some might say that the Common Platform might affect negatively the Cypriot investors, since the closer correlation of the two stock markets might restrict the ‘risk offset’ with the transfer of investments from the one stock exchange to the other. Such negative repercussions are obviously theoretical, since the dispersion of risk with the transfer of investments from the one stock exchange to the other is a practice that most Cypriot investors do not follow.
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