Volatility Spillover Effect in Western Balkans

Milica Latinovic (), Vesna Bogojevic Arsic () and Milica Bulajic ()
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Milica Latinovic: Department of Financial Management and Accounting, Faculty of Organizational Sciences, University of Belgrade, Serbia
Vesna Bogojevic Arsic: Department of Financial Management and Accounting, Faculty of Organizational Sciences, University of Belgrade, Serbia
Milica Bulajic: Department of Operations Research and Statistics, Faculty of Organizational Sciences, University of Belgrade, Serbia

Acta Oeconomica, 2018, vol. 68, issue 1, 79-100

Abstract: This article examines volatility spillover among Western Balkan’s stock markets and selected developed markets. If there is an evidence of weak linkage between various markets, then there are potential benefits that could arise from international diversification. However, if we analyse the relationship between two markets that are different in terms of their economic development, and if there is a strong connection between them, market shocks from the developed markets can have an impact on the frontier/emerging markets. Market integration can be indicated with returns linkage and transmission of shocks and volatility between markets. Hence, this can have implications for investment strategies. It is found that there is statistically significant regional spillover between countries of the Western Balkan region. Also, there is global spillover between developed markets and this region as well. Furthermore, there is evidence that Western Balkan’s markets are late in response to important market events, and that can be used when formulating investment strategy.

Keywords: volatility spillover effect; multivariate GARCH-BEKK; emerging market (search for similar items in EconPapers)
JEL-codes: C58 G15 (search for similar items in EconPapers)
Date: 2018
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