Interdependencies between Exchange Rate Volatility and Stock Market Sectors: A Case Study of Poland

Viorica Chirila () and Ciprian Chirila ()
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Viorica Chirila: “Alexandru Ioan Cuza” University from Iasi, Faculty of Economics and Business Administration, Romania
Ciprian Chirila: “Alexandru Ioan Cuza” University from Iasi, Faculty of Economics and Business Administration, Romania

Ovidius University Annals, Economic Sciences Series, 2024, vol. XXIV, issue 2, 489-498

Abstract: This study analyzes the transmission of foreign exchange market volatility from the stock market sectors and vice versa, in the case of Poland. The methodology used, spillovers indices, offers the possibility of studying volatility spillovers in different market conditions: bear and bull market. The research considers the system determined by the EUR/PLN exchange rate, stock indices of the sectors and WIG 20, which expresses the overall trend of the evolution of the Polish stock market. The results obtained confirm the spillovers effect and also the variation of volatility spillovers over time and significant differences in spillovers in different market conditions. In normal market conditions, the transmission of volatility is lower compared to the situation where the market is faced with new unexpected positive information but also with new unexpected negative information. The results obtained are important for international investors in diversifying portfolios and for hedging investments.

Keywords: stock markets sectors; risk; spillovers volatility; QVAR; spillover index (search for similar items in EconPapers)
JEL-codes: C58 D53 G15 O57 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xxiv:y:2024:i:2:p:489-498

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