Modelling volatility spillovers, cross-market correlation and co-movements between stock markets in European Union: an empirical case study
Purpose – This article examines volatility spillovers, cross-market correlation, and comovements between selected developed and former communist emerging stock markets in the European Union. Modelling the behavioural dynamics of European stock markets represents a vital topic in a fascinating contex...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Vilnius Gediminas Technical University
2021-03-01
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| Series: | Business, Management and Economics Engineering |
| Subjects: | |
| Online Access: | https://journals.vgtu.lt/index.php/BME/article/view/13588 |
| Summary: | Purpose – This article examines volatility spillovers, cross-market correlation, and comovements between selected developed and former communist emerging stock markets in the European Union. Modelling the behavioural dynamics of European stock markets represents a vital topic in a fascinating context, but also a current challenge of great interest.
Research Methodology – We propose to estimate and model volatility using GARCH family models for selected European markets. We aim to explore volatility movement, presence of leverage effect/ asymmetry in selected financial markets.
Findings – The econometric approach includes GARCH (1, 1) models for the sample period from 1, January 2000 to 12, July 2018. The empirical results revealed that exists a significant presence of volatility clustering in all selected financial markets except Poland and Croatia. The empirical analysis also indicates that both recent and past news generate a considerable impact on present volatility.
Research limitations – Our empirical study has certain limitations regarding the relatively small number of only eight stock markets.
Practical implications – It can provide a useful perspective for researchers, academics, investors, investment managers, decision-makers, and scientists.
Originality/Value – The empirical analysis is focused on 8 European stock markets, which are classified as developed (Spain, UK, Germany, and France) and emerging (Poland, Hungary, Croatia, and Romania). |
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| ISSN: | 2669-2481 2669-249X |