Dynamics of Interactions between the Stock Markets of Southeast Europe

This paper examines the interactions among the stock markets of five Southeast European countries over the 2007-2024 period. Using daily index data, the study applies correlation analysis, cointegration techniques, Vector Autoregression, and Granger causality tests to assess long- and short-term relationships under different economic conditions. The results provide no robust evidence of long-run integration, as cointegration analysis fails to confirm stable relationships among the markets. In contrast, short-term dynamics reveal varying lead-lag relationships, which intensify during periods of economic turbulence and weaken during stable periods. Croatian and Slovenian markets exhibit leading roles in earlier periods; however, this precedence is not sustained over time despite their EU membership, while the Sarajevo market remains the least integrated. Overall, the findings suggest that co-movements are driven more by external shocks and investor behavior than by persistent structural linkages, with implications for regional portfolio diversification.