Stock Market Crises and Portfolio Diversification in Central and Eastern Europe
Tsenov Academy of Economics Department of Finance and Credit Working Paper No. 03-02
30 Pages Posted: 6 Mar 2003
Date Written: January 2003
We investigate the Central and Eastern European equity market co-movements before, during and after major emerging market crises. Our study is based on the concept of co-integration. We examine the impact caused by the crisis on the gains of international portfolio diversification in Central and Eastern Europe. The results of the co-integration tests indicate that there is no long-run relationship between the US and the four Central European stock markets. We find a feedback effect and causality in one direction during and after the crisis period. Portfolio benefits decrease in the crisis period but they increase in the post-crisis period.
Keywords: Central and Eastern Europe, Stock market integration, Co-integration, Portfolio diversification
JEL Classification: C32, G15, N20
Suggested Citation: Suggested Citation