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Volatility and causality study of the daily returns on the Bucharest Stock Exchange during 2007-2011

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  • Panait, Iulian
  • Slavescu, Ecaterina Oana

Abstract

International capital markets tend to be characterized by volatility, which is always a function of world economic and political environment and is frequently associated with contagion risk and increased cross-market linkages. This phenomenon affects both developed markets and emerging markets, and, being integrated in the context of international financial markets through the globalization process, Romanian capital market could not avoid external influencing factors amplificated by economic recession. We have analyzed the the influence of the international capital markets on the evolution of Bucharest Stock Exchange during 2007-2011 in two separate periods (during the 2007-2009 crisis and after the crisis), using correlation analysis and Granger causality tests on daily data. Our main interest was to see if and how the behavior of the Bucharest Stock Exchange was different during the crisis and after the crisis and how the volatility of the Romanian market changed in the post crisis period. Our results confirmed the high degree of interconnectivity between financial markets revealed by general theory, showing that there was a high degree of correlation between the Romanian stock market and international markets during the 2007-2009, but afterwards the intensity of this correlation slightly declined. Another conclusion was that during the whole 2007-2011 period there was a clear one-way causality induced from the international capital markets towards Bucharest Stock Exchange.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41786.

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Date of creation: Oct 2011
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Handle: RePEc:pra:mprapa:41786

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Keywords: data mining; Granger; correlation; crisis; stock markets; volatility;

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References

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  1. Darbar, Salim M & Deb, Partha, 1997. "Co-movements in International Equity Markets," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(3), pages 305-22, Fall.
  2. Hartmann, Philipp & Straetmans, Stefan & de Vries, Casper, 2001. "Asset market linkages in crisis periods," Working Paper Series, European Central Bank 0071, European Central Bank.
  3. Panait, Iulian & Lupu, Iulia, 2009. "The Behavior Of The Bucharest Stock Exchange During The Current Financial Markets Crisis And Proposed Measures For Its Sustainable Development," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 1(1), pages 73-80.
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  9. Iulian Panait, 2011. "Study of the Correlation between the Romanian Stock Market and S&P500 Index during 2007-2009," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(39), pages 233-255, March.
  10. Manoj Jha, Stephen Lagakos Leonid Perlovsky & Covaci, Brindusa & Nikos Mastorakis, Azami Zaharim, 2010. "Recent Advances in Applied Mathematics," Papers 2010/300, Osterreichish-Rumanischer Akademischer Verein.
  11. Arshanapalli, Bala & Doukas, John, 1993. "International stock market linkages: Evidence from the pre- and post-October 1987 period," Journal of Banking & Finance, Elsevier, Elsevier, vol. 17(1), pages 193-208, February.
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  14. Radu Lupu & Cristiana Tudor, 2008. "Direction of Change at the Bucharest Stock Exchange," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 11(27), pages 165-185, January.
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Cited by:
  1. Corina Maria Ene & Carmen Marilena Uzlau & Iulian Panait, 2013. "Stylized Facts Of The Daily, Weekly And Monthly Returns On Bucharest Stock Exchange During 2007-2012," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(15), pages 15.

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