Stock market contagion in Central and Eastern Europe: unexpected volatility and extreme co-exceedance

Roman Horvath, Štefan Lyócsa and Eduard Baumohl

The European Journal of Finance, 2018, vol. 24, issue 5, 391-412

Abstract: We examine whether there is contagion from the US stock market to six Central and Eastern European stock markets. We use a novel measure of contagion that examines whether volatility shocks in the US stock market coupled with negative returns are followed by higher co-exceedance between US and emerging stock markets. Using our approach and controlling for a set of market-related variables, we show that during the period from 1998 to 2014, financial contagion occurred, that is, unexpected negative events in the US market are followed by higher co-exceedance between US and Central and Eastern European stock markets. Even though contagion is stronger during the financial crisis, it also occurs in tranquil times.

Date: 2018
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Working Paper: Stock Market Contagion in Central and Eastern Europe: Unexpected Volatility and Extreme Co-exceedance (2016)
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DOI: 10.1080/1351847X.2017.1307773

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