Impact of Lockdown Measures on Central-East European Stock Markets: A Cointegration and Granger Causality Analysis of Indices

Helmuth Yesid Arias Gomez and Gabriela Antošova
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Helmuth Yesid Arias Gomez: Czech Technical University in Prague (ČVUT) - Masaryk Institute of Advanced Studies (MIAS) – Institute of Economic Studies
Gabriela Antošova: Wysza Szkola Humanitas, Sosnowiec

Review of Applied Socio-Economic Research, 2023, vol. 26, issue 1, 05-16

Abstract: The outright effect of the Covid-19 pandemic on European stock markets took place during the application of lockdown and curfew measures throughout 2020. Our analysis spans the period elapsed from the initial outbreak until the arrival of the Omicron variant. We run a set of cointegration techniques incorporating the stock indices of Prague, Warsaw and Bratislava during the subsequent stages of the pandemics. We run the augmented Dickey Fuller test for bearing out cointegration relationships between pair of sequences. On the other hand, the Granger causality disclosed the capacity of the indexes for forecasting accurately each other. Later, the Error Correction Model demonstrated that not all the indexes adjust to the equilibrium value immediately. Finally, the Johansen Methodology tested the rank of matrix criteria for effectively validate the existence of a cointegrating vector in the system

Keywords: Cointegration; stock markets; long-run equilibrium. (search for similar items in EconPapers)
JEL-codes: C22 G12 G14 (search for similar items in EconPapers)
Date: 2023
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