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Causality between Regional Stock Markets: A Frequency Domain Approach

Author

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  • Nikola Gradojević
  • Eldin Dobardžić

Abstract

Using a data set from five regional stock exchanges (Serbia, Croatia, Slovenia, Hungary and Germany), this paper presents a frequency domain analysis of a causal relationship between the returns on the CROBEX, SBITOP, CETOP and DAX indices, and the return on the major Serbian stock exchange index, BELEX 15. We find evidence of a somewhat dominant effect of the CROBEX and CETOP stock indices on the BELEX 15 stock index across a range of frequencies. The results also indicate that the BELEX 15 index and the SBITOP index interact in a bi-directional causal fashion. Finally, the DAX index movements consistently drive the BELEX 15 index returns for cycle lengths between 3 and 11 days without any feedback effect. Key words: Stock market indices, Causality, Frequency domain.JEL: C58, G15.

Suggested Citation

  • Nikola Gradojević & Eldin Dobardžić, 2013. "Causality between Regional Stock Markets: A Frequency Domain Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(5), pages 633-647.
    • Handle: RePEc:voj:journl:v:60:y:2013:i:5:p:633-647:id:88
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    More about this item

    Keywords

    Stock market indices; Causality; Frequency domain;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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