A FRONTIER MARKET CASE: DOES BUCHAREST STOCK EXCHANGE HAVE A LEADING DOMESTIC INDEX?

Cornelia Pop (), Dragos Bozdog and Adina Calugaru ()
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Cornelia Pop: Faculty of Business, Babes-Bolyai Romania University, Cluj-Napoca, Romania
Adina Calugaru: MarketAxess, New York, USA

JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, 2012

Abstract: A frontier market can play a significant role in the diversification of a global portfolio. Equally important are the companies selected in order to fulfill the diversification needs. We focused on Bucharest Stock Exchange, considered a frontier market, and we analyzed its own diversification power based on the presence/ absence of a leading index that influences the price evolution of the other traded companies. This idea was suggested by the strong position of the five listed closed-end funds in the equity sector of the Bucharest Stock Exchange. We show through combined correlation, regression and Granger-causality analysis that BET-Fi has a direct influence on Bucharest Stock Exchange blue chips represented by BET index. As follows, BET-Fi can be considered an index leader and we discuss the general implications of this finding.

Keywords: frontier market; financial investment companies; Granger-causality; regression; leading index (search for similar items in EconPapers)
JEL-codes: G10 G11 (search for similar items in EconPapers)
Date: 2012
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http://tbs.ubbcluj.ro/RePEc/bbn/journl/Negotia_2_2012.pdf Revised version, 2012 (application/pdf)

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