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Co-Movements and Interactions between Segments of Parallel Markets: The Case of the Czech Republic


Jan Hanousek


CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Libor Nemecek


CERGE-EI

December 1, 1997

CERGE-EI Working Paper Series No. 122

Abstract:     
In the present paper we concentrate on interactions, co-movements and the sharing of information signals between the organized (and parallel) markets in the Czech Republic. In particular, the lead-lag relationship between the Prague Stock Exchange (PSE) and the RMS (over the counter system) is studied to identify the leaders and followers in the information transmission process. The analysis shows that the PSE holds the leading position in the the main market of actively traded stocks, but the RMS dominates on segments with lower liquidity. These links did not exist during the early history of both markets, and they have become stronger as time proceeds. The analysis of the intra-market relations also confirms that liquid segments play a leading role in both the PSE and the RMS. Due to the fact that some links between parallel market segments are missing, we conclude that the PSE and the RMS do not yet behave as a fully integrated market.

Number of Pages in PDF File: 20

Keywords: co-movements of financial markets, emerging markets, Granger causality, integration of emerging markets, lead-lag relationship.

JEL Classification: D40, E44, G12, G14.

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Date posted: January 23, 2010  

Suggested Citation

Hanousek, Jan and Nemecek, Libor, Co-Movements and Interactions between Segments of Parallel Markets: The Case of the Czech Republic (December 1, 1997). CERGE-EI Working Paper Series No. 122. Available at SSRN: http://ssrn.com/abstract=1540568 or http://dx.doi.org/10.2139/ssrn.1540568

Contact Information

Jan Hanousek (Contact Author)
CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )
Politickych veznu 7
Prague 1, 111 21
Czech Republic
420 2 2400 5119 (Phone)
420 2 2421 1374 (Fax)
HOME PAGE: http://www.cerge-ei.cz
Libor Nemecek
CERGE-EI ( email )
P.O. Box 882
7 Politickych veznu
Prague 1, 111 21
Czech Republic
HOME PAGE: http://www.cerge-ei.cz
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