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Stock market integration: a multivariate GARCH analysis on Poland and Hungary

Author

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  • Li, Hong

    (Kingston University London)

  • Majerowska, Ewa

    (University of Gdansk, Poland)

Abstract

An examination of the linkages between the emerging stock markets in Warsaw and Budapest and the established markets in Frankfurt and the U.S. By using a four-variable asymmetric GARCH-BEKK model, we find evidence of return and volatility spillovers from the developed to the emerging markets. However, as the estimated time-varying conditional co-variances and the variance decompositions indicate limited interactions among the markets, the emerging markets are weakly linked to the developed markets. The implication is that foreign investors will benefit from the reduction of risk by adding the stocks in the emerging markets to their investment portfolio.

Suggested Citation

  • Li, Hong & Majerowska, Ewa, 2006. "Stock market integration: a multivariate GARCH analysis on Poland and Hungary," Economics Discussion Papers 2006-2, School of Economics, Kingston University London.
    • Handle: RePEc:ris:kngedp:2006_002
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    References listed on IDEAS

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    Cited by:

    1. Miroslav Mateev, 2019. "Volatility relation between credit default swap and stock market: new empirical tests," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(4), pages 681-712, October.

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    More about this item

    Keywords

    stock market integration; volatility spillovers; multivariate GARCH model; asymmetric response of volatility;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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