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Testing the covariance stationarity of CEE stocks

Author

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  • Lyócsa, Štefan
  • Baumöhl, Eduard

Abstract

This paper investigates whether the daily stock returns of the Polish, Czech and Hungarian stock markets are covariance stationary. Using the Pagan – Schwert (1990) and Loretan – Phillips (1994) testing procedures, we show that contrary to the widely accepted assumption of covariance stationarity, the stock returns in Central and Eastern European (CEE) stock markets do not appear to be covariance stationary. Our results further suggest that the occurrence of unconditional volatility shifts appears to be synchronized across stocks.

Suggested Citation

  • Lyócsa, Štefan & Baumöhl, Eduard, 2012. "Testing the covariance stationarity of CEE stocks," MPRA Paper 43432, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:43432
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    References listed on IDEAS

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    Cited by:

    1. Narcisa Kadlcakova & Lubos Komarek & Zlatuse Komarkova & Michal Hlavacek, 2016. "Identification of Asset Price Misalignments on Financial Markets With Extreme Value Theory," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(11), pages 2595-2609, November.
    2. Výrost, Tomáš, 2012. "Country effects in CEE3 stock market networks: a preliminary study," MPRA Paper 43481, University Library of Munich, Germany.

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    More about this item

    Keywords

    covariance stationarity; unconditional volatility; volatility regimes; CEE stock markets;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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