(I)rationality of Investors on Croatian Stock Market – Explaining the Impact of American Indices on Croatian Stock Market
This study aims to detect and explain co-movements and spill over effects between American and Croatian stock markets. Following the methodology and findings of Erjavec and Cota (2007), the dependency of the Crobex index to the main US indices (DJIA, S&P500, NASDAQ) is further examined. The econometric study is widened, and the persistent relationship between Croatian and American indices is additionally elaborated using ARIMA and GARCH models using a different data set (January 3rd, 2005 to November 6th, 2008). Despite the fact that intra-sectoral connections between Croatian and American business sectors are rather weak, it is clear that the investors on the Croatian stock market dominantly rely on American indices movements. This was especially apparent during the beginning of the World Financial Crisis in October 2008 when the prices of Croatian companies had almost nothing to do with their business results. The behaviour of Croatian investors was largely based on the psychological effects of the crisis, and this is why behavioural finance is introduced to explain what pure financial reasoning could not. High correlation and co-movements between Croatian and American indices could be explained by three concepts; global factors, contagion and irrational escalation.
|Date of creation:||29 Jan 2009|
|Contact details of provider:|| Postal: Trg J.F.Kennedya 6, 10000 Zagreb|
Phone: +385 1 233-5633
Fax: +385 1 238-3333
Web page: http://www.efzg.hr
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:zag:wpaper:0901. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (WPS)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.