Dynamic Analysis of Selected European Stock Markets

Jiří Trešl and Dagmar Blatná

Prague Economic Papers, 2007, vol. 2007, issue 4, 291-302

Abstract: The behaviour of selected European stock indices in the period 2001-2005 was analysed. UKX (GB), DAX (Germany), CAC (France) and MIBTEL (Italy) represented well established West European markets, whereas PX-50 (Czech Republic), SKSM (Slovak Republic), BUX (Hungary) and WIG (Poland) were the examples of Central European emerging ones. The subject of this analysis were logarithmic daily returns computed from closing values of corresponding indices. Cross correlation function reached typical values 0.7 (West Europe) and 0.4 (Central Europe) excepting the Slovak Republic. The patterns of both common and solitary movements were revealed with the use of principal component and cluster analysis. To establish some dynamical relations in return time-series, vector autoregression models and Granger causality tests were employed. As for West Europe, the causal chain UKX_MIBTEL_DAX_CAC was revealed. On the other hand, the form of this chain for Central Europe was PX-50_BUX_WIG. Finally, the behaviour of both BUX and WIG returns was strongly determined by all West European counterparts.

Keywords: return modelling; stock indices; inancial time series; Granger causality (search for similar items in EconPapers)
JEL-codes: C32 G15 (search for similar items in EconPapers)
Date: 2007
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DOI: 10.18267/j.pep.309

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