Relationship between Czech and European developed stock markets: DCC MVGARCH analysis
AbstractThe study concentrates on an analysis of the Czech stock market performed by an application of DCC MV GARCH model of Engle (2002). Data sample including years from 1994 to 2009 is represented by daily returns of Prague Stock Exchange index and other 11 major stock indices. There is found an existence of increasing trend in conditional correlations among a whole European region. The trend reveals breakpoints splitting a data series into three phases of development. The analysis includes a composition of returns adjusted by exchange rates capturing a point of view of global investors. The Czech Koruna exchange rate effects in a conjunction with equity returns are identified as a possible risk aversion instrument. Granger causality concept is added in order to find a development of data flow directions in a perspective of the Czech market. Results show that unidirectional influence of foreign markets affecting Czech market occurs in data series.
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Bibliographic InfoPaper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2010/09.
Length: 35 pages
Date of creation: May 2010
Date of revision: May 2010
stock market integration; multivariate analysis; dynamic modelling; conditional correlation;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-04 (All new papers)
- NEP-IFN-2010-06-04 (International Finance)
- NEP-TRA-2010-06-04 (Transition Economics)
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