Spillover effects from London and Frankfurt to Central and Eastern European stock markets

Barry Harrison · Winston Ricardo Moore

44 citations0/0 files storedApplied Financial Economics

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Financial Risk and Volatility Modeling Financial Markets and Investment Strategies Market Dynamics and Volatility

Abstract

This article investigates comovement in stock markets between the emerging economies of Central and Eastern Europe (CEE) and the developed markets of Western Europe. Three approaches are employed to examine this issue. The first two approaches, time-varying realized correlation ratios and cointegration statistics, use a two-step technique to derive time-varying estimates of the comovement between returns on CEE and EU stock exchanges. The first step uses common factor analysis to define the factors driving CEE stock exchanges, while the second step evaluates the relationship between the leading principal factor for CEE countries and the Deutsche Aktien Xchange (DAX) and Financial Times Stock Exchange (FTSE) using time-varying realized correlation and rolling cointegration statistics. The third approach employs Multivariate Generalized Autoregressive Conditional Heteroscedasticity (MGARCH) techniques to obtain estimates of mean and variance spillover effects.

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References

2003Testing for unit roots in heterogeneous panels 2002Unit root tests in panel data: asymptotic and finite-sample properties 2002No Contagion, Only Interdependence: Measuring Stock Market Comovements 2003Modeling and Forecasting Realized Volatility 2001Extreme Correlation of International Equity Markets 1996Residual-based tests for cointegration in models with regime shifts 1995Asymmetric volatility transmission in international stock markets 2002Stock market linkages: Evidence from Latin America

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2016An investigation of return and volatility linkages among equity markets: A study of selected European and emerging countries 2016Spillover effect in Asian financial markets: A VAR-structural GARCH analysis 2011Forecasting Stock Market Volatility in Central and Eastern European Countries 2015An analysis of dependence between Central and Eastern European stock markets 2021MODELLING VOLATILITY SPILLOVERS, CROSS-MARKET CORRELATION AND CO-MOVEMENTS BETWEEN STOCK MARKETS IN EUROPEAN UNION: AN EMPIRICAL CASE STUDY

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