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An Empirical Analysis Of Stock Returns And Volatility: The Case Of Stock Markets From Central And Eastern Europe

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  • Okičić Jasmina

    (Jasmina Okičić, PhD, Assistant Professor, University of Tuzla, Faculty of Economics)

Abstract

The main goal of this paper is to investigate the behaviour of stock returns in the case of stock markets from Central and Eastern Europe (CEE), focusing on the relationship between returns and conditional volatility. Since there is relatively little empirical research on the volatility of stock returns in underdeveloped stock markets, with even fewer studies on markets in the transitional economies of the CEE region, this paper is designed to shed some light on the econometric modelling of the conditional mean and volatility of stock returns from this region. The results presented in this paper provide confirmatory evidence that ARIMA and GARCH processes provide parsimonious approximations of mean and volatility dynamics in the case of the selected stock markets. There is overwhelming evidence corroborating the existence of a leverage effect, meaning that negative shocks increase volatility more than positive shocks do. Since financial decisions are generally based upon the trade-off between risk and return, the results presented in this paper will provide valuable information in decision making for those who are planning to invest in stock markets from the CEE region.

Suggested Citation

  • Okičić Jasmina, 2015. "An Empirical Analysis Of Stock Returns And Volatility: The Case Of Stock Markets From Central And Eastern Europe," South East European Journal of Economics and Business, Sciendo, vol. 9(1), pages 7-15, April.
    • Handle: RePEc:vrs:seejeb:v:9:y:2015:i:1:p:7-15:n:3
    DOI: 10.2478/jeb-2014-0005
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    Cited by:

    1. Tamara Backović & Vesna Karadžić & Sergej Gričar & Štefan Bojnec, 2023. "Montenegrin Stock Exchange Market on a Short-Term Perspective," JRFM, MDPI, vol. 16(7), pages 1-18, June.
    2. Salahuddin, Sultan & Kashif, Muhammad & Rehman, Mobeen Ur, 2020. "Time Varying Stock Market Integration and Diversification Opportunities within Emerging and Frontier Markets," Public Finance Quarterly, Corvinus University of Budapest, vol. 65(2), pages 168-195.
    3. Muhammad Sheraz & Imran Nasir, 2021. "Information-Theoretic Measures and Modeling Stock Market Volatility: A Comparative Approach," Risks, MDPI, vol. 9(5), pages 1-20, May.

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