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Interdependence and Risk Comparison of Slovak, Hungarian and Polish Stock Markets: Policy and Managerial Implications

Author

Listed:
  • Florin Aliu

    (Department of Finance, Faculty of Management and Economics, Tomas Bata University in Zlin, Czech Republic)

  • Besnik Krasniqi

    (Faculty of Economics, University of Prishtina, Republic of Kosovo)

  • Adriana Knapkova

    (Department of Finance, Faculty of Management and Economics, Tomas Bata University in Zlin, Czech Republic)

  • Fisnik Aliu

    (Faculty of Mathematics & Natural Science, University of Prishtina, Republic of Kosovo)

Abstract

Risk captured through the volatility of stock markets stands as the essential concern for financial investors. The financial crisis of 2008 demonstrated that stock markets are highly integrated. Slovakia, Hungary and Poland went through identical centralist economic arrangement, but nowadays operate under diverse stock markets, monetary system and tax structure. The study aims to measure the risk level of the Slovak Stock Market (SAX index), Budapest Stock Exchange (BUX index) and Poland Stock Market (WIG20 index) based on the portfolio diversification model. Results of the study provide information on the diversification benefits generated when SAX, BUX and WIG20 join their stock markets. The study considers that each stock index represents an independent portfolio. Portfolios are built to stand on the available companies that are listed on each stock index from 2007 till 2017. The results of the study show that BUX generates the lowest risk and highest weighted average return. In contrast, SAX is the riskiest portfolio but generates the lowest weighted average return. The results find that the stock prices of BUX have larger positive correlation than the stock prices of SAX. Moreover, the highest diversification benefits are realized when Portfolio SAX joins Portfolio BUX and the lowest diversification benefits are achieved when SAX joins WIG20.

Suggested Citation

  • Florin Aliu & Besnik Krasniqi & Adriana Knapkova & Fisnik Aliu, 2019. "Interdependence and Risk Comparison of Slovak, Hungarian and Polish Stock Markets: Policy and Managerial Implications," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 69(2), pages 273-287, June.
    • Handle: RePEc:aka:aoecon:v:69:y:2019:i:2:p:273-287
    Note: We are very grateful for the support provided by the Internal Grant Agency of Tomas Bata University in Zlin, No. IGA/FaME/2016/018.
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    2. Iveta Palečková, 2019. "Cost Efficiency Measurement Using Two-Stage Data Envelopment Analysis in the Czech and Slovak Banking Sectors," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 69(3), pages 445-466, September.
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    More about this item

    Keywords

    portfolio diversification; risk level; eastern stock markets; financial globalisation; international diversification; financial crisis;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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