Transfer of financial risk in emerging eastern European stock markets: A sectoral perspective
AbstractWith the rise of interconnected global financial systems, there is an increased risk that a financial crisis in one country may spread to others. The contagion effects of the 2008 global financial crisis hit advanced economies fast and hard while sparing less developed and less integrated financial systems. The present study focuses on the contagion effects at Eastern European stock markets and changes in their interconnections after EU accession in 2004. Specifically, we investigate the relationship among the stock market sectors of Poland, Hungary and the Czech Republic during 19982009 and their exposure to on-shored financial risk. The evidence suggests direct linkages between different stock market sectors with respect to returns and volatilities with increased equity-shock transmission between markets after EU accession in 2004. Of particular note is the intra-industry contagion in emerging Europe. Our findings have implications for asset pricing and portfolio selection for international financial institutions and financial managers.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 24/2011.
Length: 46 pages
Date of creation: 11 Oct 2011
Date of revision:
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More information through EDIRC
GARCH-BEKK; international risk transfer; emerging Eastern Europe; spillovers; intra- and inter-industry contagion;
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
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-22 (All new papers)
- NEP-BAN-2011-10-22 (Banking)
- NEP-CIS-2011-10-22 (Confederation of Independent States)
- NEP-EEC-2011-10-22 (European Economics)
- NEP-TRA-2011-10-22 (Transition Economics)
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