Are There Benefits from Trading Strategy Based on the Returns Spillovers to the Emerging Stock Markets?: Evidence from Poland

Janusz Brzeszczynski and Aleksander Welfe

Emerging Markets Finance and Trade, 2007, vol. 43, issue 4, 74-92

Abstract: This study investigates benefits from a trading strategy based on the spillovers from international stock markets to the Polish emerging stock market. The analysis is conducted within the framework of factor and predictive generalized autoregressive conditional heteroskedasticity (GARCH) models of the Warsaw Stock Exchange main index, WIG. We apply an approach in which the mean equation of the GARCH model includes a deterministic part incorporating cross-markets linkages. Both in-sample and out-of-sample forecasts from the estimated models are calculated. The trading strategy is based on signals from the out-of-sample predictions. The models' performance and benefits from adopting such a strategy are evaluated using direction quality measures. Our results suggest that predictive models using cross-market linkages can produce superior out-of-sample forecasts compared to benchmarks.

Keywords: direction quality measures; emerging market; factor GARCH; in-sample versus out-of-sample forecasts; predictive GARCH; stock market; trading strategy (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://mesharpe.metapress.com/link.asp?target=contribution&id=R12K115500202134 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:43:y:2007:i:4:p:74-92

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().