Interdependence and Risk Comparison of Slovak, Hungarian and Polish Stock Markets: Policy and Managerial Implications

Florin Aliu (), Besnik Krasniqi (), Adriana Knapkova () and Fisnik Aliu ()
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Florin Aliu: Department of Finance, Faculty of Management and Economics, Tomas Bata University in Zlin, Czech Republic
Adriana Knapkova: Department of Finance, Faculty of Management and Economics, Tomas Bata University in Zlin, Czech Republic
Fisnik Aliu: Faculty of Mathematics & Natural Science, University of Prishtina, Republic of Kosovo

Acta Oeconomica, 2019, vol. 69, issue 2, 273-287

Abstract: Risk captured through the volatility of stock markets stands as the essential concern for financial investors. The financial crisis of 2008 demonstrated that stock markets are highly integrated. Slovakia, Hungary and Poland went through identical centralist economic arrangement, but nowadays operate under diverse stock markets, monetary system and tax structure. The study aims to measure the risk level of the Slovak Stock Market (SAX index), Budapest Stock Exchange (BUX index) and Poland Stock Market (WIG20 index) based on the portfolio diversification model. Results of the study provide information on the diversification benefits generated when SAX, BUX and WIG20 join their stock markets. The study considers that each stock index represents an independent portfolio. Portfolios are built to stand on the available companies that are listed on each stock index from 2007 till 2017. The results of the study show that BUX generates the lowest risk and highest weighted average return. In contrast, SAX is the riskiest portfolio but generates the lowest weighted average return. The results find that the stock prices of BUX have larger positive correlation than the stock prices of SAX. Moreover, the highest diversification benefits are realized when Portfolio SAX joins Portfolio BUX and the lowest diversification benefits are achieved when SAX joins WIG20.

Keywords: portfolio diversification; risk level; eastern stock markets; financial globalisation; international diversification; financial crisis (search for similar items in EconPapers)
JEL-codes: G11 G32 (search for similar items in EconPapers)
Date: 2019
Note: We are very grateful for the support provided by the Internal Grant Agency of Tomas Bata University in Zlin, No. IGA/FaME/2016/018.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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