The Linkages between the Stock Markets of Central and Eastern European Countries
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Using correlation analysis and extended GARCH model, this paper examines the comovement of equity markets of four countries in the Central and Eastern European region (i.e., Russia, Poland, Czech, and Hungary) and the dependence structure of these to the equity markets of the U.S., Germany, and Korea for the period from 2003 to 2008. This paper finds a strong linkage between the Central and Eastern European markets and the U.S. as well as Germany. This paper also observes a strong spillover effects in both stock returns and volatility from the U.S. or German markets to the Central and Eastern European markets. A comparison of the results for the first (2003-2005) to those of the second (2006-2008) sub-period studied indicates that linkages grew for all these markets, but most profoundly for the Central and Eastern European markets. The results of this paper suggests that the potential benefits from diversifying portfolio into the Central and Eastern European equity markets are limited, and the degree of dependence between equity markets is associated with the economic linkage between countries.
Abstract
Using correlation analysis and extended GARCH model, this paper examines the comovement of equity markets of four countries in the Central and Eastern European region (i.e., Russia, Poland, Czech, and Hungary) and the dependence structure of these to the equity markets of the U.S., Germany, and Korea for the period from 2003 to 2008. This paper finds a strong linkage between the Central and Eastern European markets and the U.S. as well as Germany. This paper also observes a strong spillover effects in both stock returns and volatility from the U.S. or German markets to the Central and Eastern European markets. A comparison of the results for the first (2003-2005) to those of the second (2006-2008) sub-period studied indicates that linkages grew for all these markets, but most profoundly for the Central and Eastern European markets. The results of this paper suggests that the potential benefits from diversifying portfolio into the Central and Eastern European equity markets are limited, and the degree of dependence between equity markets is associated with the economic linkage between countries.
참고문헌 (16)
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