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

CERGE-EI Working Paper Series No. 122

20 Pages Posted: 23 Jan 2010  

Jan Hanousek

CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); Charles University in Prague; Academy of Sciences of the Czech Republic; Centre for Economic Policy Research (CEPR)

Libor Nemecek

CERGE-EI

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 1997

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.

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

JEL Classification: D40, E44, G12, G14.

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: https://ssrn.com/abstract=1540568 or http://dx.doi.org/10.2139/ssrn.1540568

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

Charles University in Prague ( email )

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Praha 1, 116 36
Czech Republic

Academy of Sciences of the Czech Republic ( email )

Narodni 3, 111 42
Praha 1
Czech Republic

Centre for Economic Policy Research (CEPR) ( email )

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London, EC1V 3PZ
United Kingdom

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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