An analysis of CEE equity market integration and their volatility spillover effects

Ngo Thai Hung

European Journal of Management and Business Economics, 2019, vol. 29, issue 1, 23-40

Abstract: Purpose - The purpose of this paper is to examine the conditional correlations and spillovers of volatilities across CEE markets, namely, Hungary, Poland, the Czech Republic, Romania and Croatia, in the post-2007 financial crisis period. Design/methodology/approach - The authors use five-dimensional GARCH-BEKK alongside with the CCC and DCC models. Findings - The estimation results of the three models generally demonstrate that the correlations between these markets are particularly significant. Also, own-volatility spillovers are generally lower than cross-volatility spillovers for all markets. Practical implications - These results recommend that investors should take caution when investing in the CEE equity markets as well as diversifying their portfolios so as to minimize risk. Originality/value - Unlike the previous studies in this field, this paper is the first study using multivariate GARCH-BEKK alongside with CCC and DCC models. The study makes an outstanding contribution to the existing literature on spillover effects and conditional correlations in the CEE financial stock markets.

Keywords: Volatility spillovers; DCC; BEKK; CCC; CEE finance; Conditional correlations (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ejmbep:ejmbe-01-2019-0007

DOI: 10.1108/EJMBE-01-2019-0007

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