The Spillover Effect on the CEE Equity Markets and the Financial Contagion in the Context of Financial Integration

Contact_cb@yahoo.com. (), Simona Stamule () and Iulian Cornel Lolea ()
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Contact_cb@yahoo.com.: Aurel Vlaicu University of Arad
Simona Stamule: Technical University of Civil Engineering of Bucharest
Iulian Cornel Lolea: Bucharest University of Economic Studies. Corresponding author.

Journal for Economic Forecasting, 2021, issue 4, 155-170

Abstract: The purpose of this paper is to analyze the contagion effect between the equity markets in some of the CEE countries, namely Hungary, Poland, the Czech Republic, Romania, and Bulgaria, as compared to the Euro Zone. In this paper, we focus on the volatility transmission during the crisis period using the spillover index introduced by Diebold and Yilmaz (2009, 2012), which measures both total and directional volatility spillovers in a generalized VAR framework that eliminates the possible dependence of results on ordering. Also, we have used a DCC-GARCH approach to follow conditional correlations between markets. Because all our initial expectations were confirmed, the results should be taken into consideration by investors, who should take caution when investing in the CEE equity markets as well as when diversifying their portfolios to minimize risk.

Keywords: volatility; risk; contagion; financial markets; European Union; correlation; time series (search for similar items in EconPapers)
JEL-codes: C22 G11 G15 (search for similar items in EconPapers)
Date: 2021
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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:2021:i:4:p:155-170

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