Stock Market Integration between Three CEECs, Russia and the UK

24 Pages Posted: 22 Mar 2010

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Nicola Spagnolo

Brunel University London - Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: March 2010

Abstract

This paper estimates a tri-variate VAR-GARCH(1,1)-in-mean model to examine linkages between the stock markets of three Central and Eastern European countries (CEECs), specifically the Czech Republic, Hungary, and Poland, and both the UK and Russia. The adopted framework allows to analyse interdependence by estimating volatility spillovers, and also contagion by testing for possible shifts in the transmission of volatility following the introduction of the euro and EU accession. Further evidence on possible changes in the transmission mechanism (namely, on whether there is contagion) can be obtained by examining the conditional correlations implied by the estimated model over different time periods. The empirical findings suggest that there is significant co-movement (interdependence) of these CEEC markets with both the Russian and the UK ones. Furthermore, whilst the introduction of the euro has had mixed effects, EU accession has resulted in an increase in volatility spillovers between the three CEECs considered and the UK (contagion).

Keywords: Central and Eastern European countries (CEECs), volatility spillovers, interdependence, contagion, VAR-GARCH-in-mean model

JEL Classification: C32, F36, G15

Suggested Citation

Caporale, Guglielmo Maria and Spagnolo, Nicola, Stock Market Integration between Three CEECs, Russia and the UK (March 2010). CESifo Working Paper Series No. 2978. Available at SSRN: https://ssrn.com/abstract=1571053

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

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HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Nicola Spagnolo

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom

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