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Modeling Comovement among Emerging Stock Markets: The Case of Budapest and Istanbul

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    Abstract

    A double world index model is proposed as an ideal way of characterizing the comovement among emerging stock markets, and applied to Budapest-Istanbul as an interesting case. An exclusive increase in the correlation between Budapest and Istanbul during the recent crisis period is documented. To decompose this correlation into information dynamics, a structural vector autoregression (SVAR) model is employed which controls for global indices that enter the system exogenously. Istanbul and Budapest contain incremental information for each other after controlling for global factors, in particular during and after the recent global crisis. Impulse response results suggest significant lagged responses, which imply predictability. Istanbul appears to respond to global information faster.

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    Bibliographic Info

    Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

    Volume (Year): 61 (2011)
    Issue (Month): 3 (July)
    Pages: 277-304

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    Handle: RePEc:fau:fauart:v:61:y:2011:i:3:p:277-304

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    Keywords: comovement of stock markets; European emerging markets; structural VAR; world index model;

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