Spillover Effects of Stock Markets in the COVID-19 Pandemic Period: Evidence From Central and East European Countries

Selma Öner, Hakan Öner and Hande Kılıç Satıcı ()
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Selma Öner: Istanbul University-Cerrahpasa, Social Sciences Finance-Banking and Insurance, Istanbul, Turkiye
Hakan Öner: Nisantasi University, Faculty of Economics, Administrative and Social Sciences, Istanbul, Turkiye
Hande Kılıç Satıcı: Istanbul University-Cerrahpasa, Social Sciences Finance-Banking and Insurance, Istanbul, Turkiye

Istanbul Journal of Economics-Istanbul Iktisat Dergisi, 2022, vol. 72, issue 72-1, 211-238

Abstract: This study aims to investigate the correlation and the spillover effects between Central and East European (CEE) Countries’ stock markets during the Covid-19 Pandemic Period. CEE countries are listed as Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, the Slovak Republic, Slovenia, Estonia, Latvia, and Lithuania by OECD. The data set was obtained from the Bloomberg data services and includes 308 observations of daily returns between March 11th, 2020 and August 1st, 2021. As a result of the empirical analysis using the Pearson Correlation, the Multivariate VAR Model, and the Granger Causality Test, a high correlation was found between the stock markets of CEE countries, and 15 causality relationships were determined. The analysis also revealed bidirectional relationships between the Bulgaria Stock Exchange Index and Romania Bucharest Stock Exchange Index, the Polish Warsaw Stock Exchange Index and Croatia Zagreb Stock Exchange Index, the Romania Bucharest Stock Exchange Index and Bulgaria Stock Exchange Index, and the Croatia Zagreb Stock Exchange Index and Polish Warsaw Stock Exchange Index. High correlation and causality relationships, which are also supported by impulse-response and variance decomposition test results, reveal that there is a spillover effect between the stock markets of CEE countries.

Keywords: Stock markets; Pearson correlation; Granger causality test; COVID-19 pandemic period; CEE countries JEL Classification: C58; F30; F31 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ist:journl:v:72:y:2022:i:1:p:211-238

DOI: 10.26650/ISTJECON2021-994570

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