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Crisis periods and contagion effects in the CEE stock markets: the influence of the 2007 US subprime crisis

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  • Joanna Olbrys
  • Elzbieta Majewska

Abstract

The main goal of this paper is a direct identification of crisis periods in the eight Central and Eastern European (CEE) equity markets, and, for comparison, in the US market. A statistical procedure of dividing market states into up and down markets is employed. The results confirm October 2007-February 2009 as the common period of the recent global financial crisis in the CEE markets, except for Slovakia. Moreover, the effect of increasing cross-market correlations in the crisis period in the context of contagion is investigated, applying both standard contemporaneous correlations and volatility-adjusted correlation coefficients. A research hypothesis that there was no contagion effect among the US and the CEE stock markets during the 2007-2009 crisis is explicitly tested. The robustness analysis of contagion tests based on monthly, weekly and daily data is provided. The results reveal that the utilised tests are rather less sensitive with respect to the choice of data frequency.

Suggested Citation

  • Joanna Olbrys & Elzbieta Majewska, 2016. "Crisis periods and contagion effects in the CEE stock markets: the influence of the 2007 US subprime crisis," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 6(2), pages 124-137.
    • Handle: RePEc:ids:ijcome:v:6:y:2016:i:2:p:124-137
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    1. Peter Arendas & Jana Kotlebova, 2019. "The Turn of the Month Effect on CEE Stock Markets," IJFS, MDPI, vol. 7(4), pages 1-19, October.
    2. Joanna Olbryś & Elżbieta Majewska, 2020. "Assessing Commonality in Liquidity with Principal Component Analysis: The Case of the Warsaw Stock Exchange," JRFM, MDPI, vol. 13(12), pages 1-13, December.

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