Panel GARCH Model with Cross-Sectional Dependence between CEE Emerging Markets in Trading Day Effects Analysis

Josip Arneric and Blanka ŠKRABIĆ Perić ()
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Blanka ŠKRABIĆ Perić: University of Split, Faculty of Economics, Split, Croatia

Journal for Economic Forecasting, 2018, issue 4, 71-84

Abstract: The presence of the weekday effects of 10 emerging CEE stock markets is explored. Simultaneously, the cross-sectional dependence between daily returns of national stocks is controlled. Most of the previous studies neglect cross-sectional dependence in case of univariate analysis. Rare studies of the weekday effects include multivariate GARCH, considering only a few markets as it suffers from high dimensionality. Thus, we specify and estimate a panel GARCH with a relatively small number of parameters. Results indicate a strong presence of the Monday effect in both mean and variance equations, while the Tuesday effect is present only in the mean equation. Empirical findings also confirm the existence of the cross-sectional dependence, particularly dependence of Poland with Hungary, Czech and Croatia.

Keywords: panel GARCH; time-varying covariance; market anomalies; emerging CEE markets; maximum likelihood estimates (search for similar items in EconPapers)
JEL-codes: C32 C33 G1 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2018:i:4:p:71-84

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