Volatility and Correlations for Stock Markets in the Emerging Economies of Central and Eastern Europe: Implications for European Investors

22 Pages Posted: 22 May 2010

See all articles by David E. Allen

David E. Allen

School of Mathematics and Statistics, The University of Sydney; Financial Research Network (FIRN); Department of Finance; School of Business and Law, Edith Cowan University

Robert J. Powell

Edith Cowan University - School of Accounting, Finance and Economics; Financial Research Network (FIRN)

Anna Golab

Edith Cowan Unversity

Date Written: May 19, 2010

Abstract

This paper examines the implications for European investors of the recent EU expansion to encompass former Eastern block economies. What were the risk and return characteristics of these markets pre- and post-EU? What are the implications for investors within the Euro zone? Should investors diversify outside the CEE? The former Eastern block economies constitute emerging markets which typically offer attractive risk adjusted returns for international investors. In this paper, we explore a number of aspects of this important issue and their implications for CEE based investors culminating in a Markowitz efficient frontier analysis of these markets pre- and post-EU expansion. The results suggest the ‘advanced emerging’ markets of Poland, Hungary, and Czech Republic are less attractive post-EU to a portfolio based investor seeking diversification benefits than the ‘other emerging markets.’

Keywords: Emerging Markets, EU, Portfolio Diversification, Investment Returns

JEL Classification: G11

Suggested Citation

Allen, David Edmund and Powell, Robert J. and Golab, Anna, Volatility and Correlations for Stock Markets in the Emerging Economies of Central and Eastern Europe: Implications for European Investors (May 19, 2010). Available at SSRN: https://ssrn.com/abstract=1611472 or http://dx.doi.org/10.2139/ssrn.1611472

David Edmund Allen (Contact Author)

School of Mathematics and Statistics, The University of Sydney ( email )

School of Mathematics and Statistics F07
University of Sydney
Sydney, New South Wales 2006
Australia

HOME PAGE: http://www.maths.usyd.edu.au

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Department of Finance ( email )

Taiwan
Taiwan

School of Business and Law, Edith Cowan University

100 Joondalup Drive
Joondalup, WA 6027
Australia

HOME PAGE: http://www.dallenwapty.com

Robert J. Powell

Edith Cowan University - School of Accounting, Finance and Economics ( email )

Joondalup Campus
Perth
Joondalup 6027, WA
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Anna Golab

Edith Cowan Unversity ( email )

270 Joondalup Drive
Joondalup, WA 6027
Australia

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