Long-Run Association Across Stock Markets in South-East Europe and Mean-Volatility Spillovers With Mature Markets

Conference: “The Economy of Bulgaria and the European Union in the Digital World”, UNWE, Sofia, Bulgaria, 2018

14 Pages Posted: 17 Apr 2020

See all articles by Saso Arsov

Saso Arsov

Ss. Cyril and Methodius University - Facuty of Economics

Aleksandar Naumoski

Ss. Cyril and Methodius University - Faculty of Economics

Date Written: november 23, 2018

Abstract

This paper explores the inter-market linkages and the transmission of financial information among the capital markets of five South-Eastern European countries and their relationships with some of the mature markets. The Johansen co-integration framework pointed to the existence of one co-integrating vector, but the results could not be validated through standard tests. The VAR model that included the mature markets as well, revealed certain causal dependencies among the markets. Positive and significant ARCH and GARCH effects were found to exist on all of the markets, except in Slovenia and mean spillover effects from Germany into all of the younger markets were identified, as well as between some of the younger markets themselves. Volatility spillovers were also confirmed in almost the same instances. The implication for the investors is that they should closely monitor the trends in the leading markets as a source of valuable information for the composition of their portfolios. For the policymakers, the knowledge of the direction of the impacts is important for the purpose of predicting future exogenous shocks. An additional value of the paper is that these five markets, their mutual relationships and the linkages with mature markets are jointly analysed for the first time.

Keywords: Stock Markets, Volatility, Spillovers, Interdependency, GARCH, VAR, Cointegration, Portfolio

JEL Classification: G11, G12, G14, G15

Suggested Citation

Arsov, Saso and Naumoski, Aleksandar, Long-Run Association Across Stock Markets in South-East Europe and Mean-Volatility Spillovers With Mature Markets (november 23, 2018). Conference: “The Economy of Bulgaria and the European Union in the Digital World”, UNWE, Sofia, Bulgaria, 2018, Available at SSRN: https://ssrn.com/abstract=3559434 or http://dx.doi.org/10.2139/ssrn.3559434

Saso Arsov (Contact Author)

Ss. Cyril and Methodius University - Facuty of Economics ( email )

Bul. Krste Miriskov bb
Skopje, 1000
Macedonia

HOME PAGE: http://www.eccf.ukim.edu.mk

Aleksandar Naumoski

Ss. Cyril and Methodius University - Faculty of Economics ( email )

Skopje
Macedonia

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