Modelling Returns on Stock Indices for Western and Central European Stock Exchanges - a Markov Switching Approach

Jedrzej Bialkowski

South-Eastern Europe Journal of Economics, 2004, vol. 2, issue 2, 81-100

Abstract: In this paper a Markov switching mixture of normal distributions is applied to the monthly returns on the main stock indices for emerging financial markets in central Europe (BUX, PX50 and WIG). Additionally the results are compared to those obtained for western Europe (DAX, CAC40 and FTSE100). The results of model comparison suggest that the Markov switching mixture of normal distributions has substantially more descriptive validity than a single normal distribution. Nevertheless, there is no clear indication that, in modelling monthly returns, the Markov switching mixture of three normal distributions is superior to the mixture of two. Finally, the ability of the models to describe returns during international financial crises is evaluated.

Keywords: Markov switching mixture of normal distributions; Modelling returns; Emerging stock markets in central Europe; International financial crises (search for similar items in EconPapers)
JEL-codes: C22 E37 F36 G12 (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.asecu.gr/Seeje/issue03/bialkowski.pdf (application/pdf)

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:seb:journl:v:2:y:2004:i:2:p:81-100

Access Statistics for this article

More articles in South-Eastern Europe Journal of Economics from Association of Economic Universities of South and Eastern Europe and the Black Sea Region Contact information at EDIRC.
Bibliographic data for series maintained by Ms. Melina Petromelidou ().