Volatility Spillovers between Stock and Currency Markets: Evidence from Emerging Eastern Europe

25 Pages Posted: 25 Aug 2009

See all articles by Elena Fedorova

Elena Fedorova

Lappeenranta University of Technology, School of Business

Kashif Saleem

Lappeenranta University of Technology - School of Business (LSB)

Date Written: August 24, 2009

Abstract

The purpose of this study is in three folds. First we look at the linkage between Eastern European emerging equity markets and Russia, second we investigate the relationship among the currency markets of Poland, Hungry, Russia and Czech Republic. Finally, we examine the interdependence between Emerging Eastern European and Russian equity and currency markets. We estimate a bivariate GARCH-BEKK model proposed by Engle and Kroner (1995) using weekly returns. We find the evidence of direct linkage between the equity markets, both in regards of returns and volatility, as well as in currency markets. While analyzing the relationship between currency and stock markets we found unidirectional volatility spillovers from currency to stock markets. Results show clear evidence of Eastern European markets integration within the region and with Russia as well.

Keywords: GARCH-BEKK, volatility spillovers, stock market, currency market, Emerging Eastern Europe, Russia

JEL Classification: C32, G15

Suggested Citation

Fedorova, Elena and Saleem, Kashif, Volatility Spillovers between Stock and Currency Markets: Evidence from Emerging Eastern Europe (August 24, 2009). 22nd Australasian Finance and Banking Conference 2009. Available at SSRN: https://ssrn.com/abstract=1460645 or http://dx.doi.org/10.2139/ssrn.1460645

Elena Fedorova

Lappeenranta University of Technology, School of Business ( email )

P.O. Box 20
Lappeenranta, 53851
Finland
+358503226538 (Phone)
+358294463246 (Fax)

HOME PAGE: http://www.lut.fi/

Kashif Saleem (Contact Author)

Lappeenranta University of Technology - School of Business (LSB) ( email )

Department of Finance
PO Box 20
Lappeenranta, 53851
Finland
+358 5 621 7284 (Phone)

HOME PAGE: http://www.lut.fi/kati/staff.php?start=0&id=329

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