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A Frontier Market Case: Does Bucharest Stock Exchange Have A Leading Domestic Index?

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Author Info

  • CORNELIA POP

    ()
    (Faculty of Business, Babes-Bolyai Romania University, Cluj-Napoca, Romania)

  • DRAGOS BOZDOG

    ()
    (Department of Mathematica Sciences, Stevens Institute of Technology, Hoboken, NJ, USA)

  • ADINA CALUGARU

    ()
    (MarketAxess, New York, USA)

Abstract

A frontier market can play a significant role in the diversification of a global portfolio. Equally important are the companies selected in order to fulfill the diversification needs. We focused on Bucharest Stock Exchange, considered a frontier market, and we analyzed its own diversification power based on the presence/ absence of a leading index that influences the price evolution of the other traded companies. This idea was suggested by the strong position of the five listed closed-end funds in the equity sector of the Bucharest Stock Exchange. We show through combined correlation, regression and Granger-causality analysis that BET-Fi has a direct influence on Bucharest Stock Exchange blue chips represented by BET index. As follows, BET-Fi can be considered an index leader and we discuss the general implications of this finding.

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File URL: http://tbs.ubbcluj.ro/RePEc/bbn/journl/Negotia_2_2012.pdf
File Function: Revised version, 2012
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Bibliographic Info

Article provided by Babes-Bolyai University, Faculty of Business in its journal JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA.

Volume (Year): (2012)
Issue (Month): ()
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Handle: RePEc:bbn:journl:2012_2_1_pop

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Keywords: frontier market; financial investment companies; Granger-causality; regression; leading index;

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