THE EFFECT OF THE FINANCIAL CRISIS ON THE RETURNS OF THE CEE CAPITAL MARKETS

Dan Armeanu (), Adrian Enciu, Carmen Obreja and Sorin-Iulian Cioaca

Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, 2016, vol. 10, issue 1, 474-481

Abstract: In this article, we study the impact on return and volatility of CEE capital markets during three crises (subprime crisis, global financial crisis and the crisis generated by Brexit), occurred between January, 1st 2007 – August, 26th, 20016, taking into consideration the daily returns of the stock exchange indexes for 5 CEE countries. In order to reduce the initial causal space, represented by the returns on CEE markets, we used the Principal Component Analysis (PCA). A principal component was identified and placed within a AR(2)-GARCH(1,1) model for return and associated volatility. The results show that the volatility during the global crisis and that related to the Brexit moment are statistically significant, but they present different coefficients: the volatility boosted during the global financial crisis and lowered after the Brexit announcement. This late result can be explained by the prudent stance of the investors who are concerned to evaluate the impact of the Brexit and the consequences for the financial markets of the associated measures.

Keywords: capital market; contagion risk; volatility. (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:rom:mancon:v:10:y:2016:i:1:p:474-481

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