Time-varying behavior of long-run among stock markets in Western Europe

This paper aims to investigate the potential time-varying behavior of long-run stock market relationship in Western Europe Markets (DAX, FTSE100 and CAC40). To do this we apply the Engle-Granger methodology with and no structural breaks. It is shown that indices from these three markets are cointegrated and the change in long-term relationship between them is more unstable for DAX/FTSE100. Also we identified that there is an opposite relationship in long-term changes in these markets, i.e., when the relationship between DAX/CAC40 weakens the relationship between DAX/FTSE100 intensifies. Key-Words: cointegration, stock markets, structural breaks, Engle-Granger, long-rum, crisis.