Intra-sector financial integration; An empirical investigation of telecommunications stock prices

In this study we investigate the long run interactions among major international telecommunications companies equities in order to trace significant indications of synchronizations in their price determination procedure. Using Johansen's cointegration Analysis we find strong evidence of existence of common factors in the international telecommunications companies stock prices' deterministic process, eliminating the idiosyncratic stochastic trends, thus leaving only one common stochastic trend out of the cointegration space, driving all of the system's variables' stochastic processes. Specifically serving our aim to trace evidence of integration among the major international telecommunications' companies stock prices, namely the prices of AT&T, NTT, BT, Deutsche Telecom and France Telecom, we use Cointegration Analysis for non-stationary time series in order to analyze the common stochastic trends and the exogeneity characteristics of the corresponding stock prices for the time period 1999:1 to 2005:12.