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An analysis of dependence between Central and Eastern European stock markets

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  • Reboredo, Juan C.
  • Tiwari, Aviral Kumar
  • Albulescu, Claudiu Tiberiu

Abstract

We examine the dependence structure between four Central and Eastern European (CEE) stock markets (Czech Republic, Hungary, Poland and Romania) using static and dynamic copula functions with different forms of tail dependence. We find evidence of positive dependence between all CEE stock markets, although this dependence is stronger between the Hungarian, Czech and Polish markets than between these markets and the Romanian market. We also find evidence of symmetric tail dependence, although not for the Hungarian and Czech markets. The dependence is time-varying and intensified after the onset of the recent global financial crisis. These results confirm that CEE stock markets are gradually coupling, a fact that has risk management implications for policymakers and investors.

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  • Reboredo, Juan C. & Tiwari, Aviral Kumar & Albulescu, Claudiu Tiberiu, 2015. "An analysis of dependence between Central and Eastern European stock markets," Economic Systems, Elsevier, vol. 39(3), pages 474-490.
    • Handle: RePEc:eee:ecosys:v:39:y:2015:i:3:p:474-490
    DOI: 10.1016/j.ecosys.2015.01.002
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