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(I)rationality of Investors on Croatian Stock Market – Explaining the Impact of American Indices on Croatian Stock Market


  • Domagoj Sajter

    () (Faculty of Economics in Osijek, University of Osijek)

  • Tomislav Ćorić

    () (Faculty of Economics and Business, University of Zagreb)


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.

Suggested Citation

  • Domagoj Sajter & Tomislav Ćorić, 2009. "(I)rationality of Investors on Croatian Stock Market – Explaining the Impact of American Indices on Croatian Stock Market," EFZG Working Papers Series 0901, Faculty of Economics and Business, University of Zagreb.
  • Handle: RePEc:zag:wpaper:0901

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    Cited by:

    1. repec:zag:zirebs:v:20:y:2017:i:sci:p:41-58 is not listed on IDEAS
    2. Tomić, Bojan & Sesar, Andrijana & Džaja, Tomislav, 2014. "Komparativna analiza europskog tržišta kapitala i Dow Jones Industrial Average indeksa
      [Comparative analysis of european capital market and Dow Jones Industrial Average Index]
      ," MPRA Paper 55555, University Library of Munich, Germany.
    3. Tomić, Bojan & Sesar, Andrijana, 2015. "Interdependence of Industrial Production Index and capital market in Croatia: VAR model," MPRA Paper 66816, University Library of Munich, Germany.

    More about this item


    ARIMA; GARCH; Crobex; Zagreb Stock Exchange; financial crisis; behavioural finance;

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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