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Long And Short-Run Linkages In Cee Stock Markets: Implications For Portfolio Diversification And Stock Market Integration

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  • Manolis Syllignakis

    ()

  • Georgios Kouretas

    ()

Abstract

This paper examines the short- and long-term relationships between seven Central Eastern European (CEE) stock markets and two developed stock markets, namely the German market and the US market. Application of the Gonzalo and Granger (1995) methodology indicates that the examined stock markets are partially integrated, while there is also evidence that the five stock markets in the central Europe (Czech Republic, Hungary, Poland, Slovenia and Slovakia) together with the German and the US stock markets have a significant common permanent component, which drives this system of stock exchanges in the long run. Contrary, the Estonian and Romania markets are segmented. A DCC model indicates that the short ??? term interdependencies between the CEE stock markets and the developed stock markets have strengthened during the Asian and Russian crises but since then (except for the Czech Republic, Hungary, Poland) they returned almost to their initial (relatively low) levels. Moreover, significantly increased volatility is observed during the Russian crisis period for all the markets under enquiry.

Suggested Citation

  • Manolis Syllignakis & Georgios Kouretas, 2006. "Long And Short-Run Linkages In Cee Stock Markets: Implications For Portfolio Diversification And Stock Market Integration," William Davidson Institute Working Papers Series wp832, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2006-832
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/57212/1/wp832.pdf
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    References listed on IDEAS

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    9. R. Gaston Gelos & Ratna Sahay, 2001. "Financial market spillovers in transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 53-86, March.
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    Citations

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    Cited by:

    1. Julia Stefanova, 2013. "Strategic Priorities to the Bulgarian Capital Market for Strengthening the Integration to EU," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 45-73.
    2. Alenka Kavkler & Mejra Festić, 2011. "Modelling Stock Exchange Index Returns in Different GDP Growth Regimes," Prague Economic Papers, University of Economics, Prague, vol. 2011(1), pages 3-22.
    3. Ian Babetskii & Luboš Komárek & Zlatuše Komárková, 2007. "Financial Integration of Stock Markets among New EU Member States and the Euro Area," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(7-8), pages 341-362, September.
    4. Ioan TRENCA & Eva DEZSI, 2010. "The integration of capital markets: correlation analysis," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(12), pages 44-53, December.
    5. STEFANOVA, Julia, 2015. "Problems And Challenges Facing The Capital Markets Of Bulgaria And Macedonia," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 2(1), pages 152-161.
    6. Radman Peša, Anita & Brajković, Ana, 2015. "Testing The ‘Black Swan Effect’ on Croatian Stock Market Between 2000 and 2013," MPRA Paper 69223, University Library of Munich, Germany, revised 2015.
    7. Silvo Dajcman, 2012. "The Dynamics of Return Comovement and Spillovers Between the Czech and European Stock Markets in the Period 1997–2010," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(4), pages 368-390, August.
    8. Anita Radman Peša & Mejra Festić, 2012. "Testing the “EU Announcement Effect” on Stock Market Indices and Macroeconomic Variables in Croatia Between 2000 and 2010," Prague Economic Papers, University of Economics, Prague, vol. 2012(4), pages 450-469.
    9. repec:prg:jnlpep:v:2013:y:2013:i:4:id:434:p:450-469 is not listed on IDEAS

    More about this item

    Keywords

    Central Eastern European equity markets; Market Integration; Common trends; DCC; SWARCH-L.;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • 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

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