Comovement of Central European stock markets using wavelet coherence: Evidence from high-frequency data

Jozef Baruník, Lukas Vacha and Ladislav Krištoufek ()

No 2011/22, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: In this paper, we contribute to the literature on international stock market comovement. The novelty of our approach lies in usage of wavelet tools to high-frequency financial market data, which allows us to understand the relationship between stock market returns in a different way. Major part of economic time series analysis is done in time or frequency domain separately. Wavelet analysis can combine these two fundamental approaches, so we can work in time-frequency domain. Using wavelet power spectra and wavelet coherence, we have uncovered interesting dynamics of cross-correlations between Central European and Western European stock markets using high-frequency data. Our findings provide possibility of a new approach to financial risk modeling.

Keywords: comovement; stock market; wavelet analysis; wavelet coherence (search for similar items in EconPapers)
JEL-codes: C22 C40 E32 F30 G15 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2011-06, Revised 2011-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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