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Stock Market Integration between Three CEECs, Russia, and the UK
Author(s) -
Caporale Guglielmo Maria,
Spagnolo Nicola
Publication year - 2011
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2010.00938.x
Subject(s) - economics , accession , volatility (finance) , autoregressive conditional heteroskedasticity , stock (firearms) , czech , international economics , stock market , financial contagion , monetary economics , financial integration , market integration , financial market , financial economics , financial crisis , econometrics , european union , macroeconomics , geography , finance , linguistics , philosophy , context (archaeology) , archaeology
This paper estimates a trivariate VAR‐GARCH(1,1)‐in‐mean model to examine linkages between the stock markets of three Central and Eastern European countries (CEECs), specifically the Czech Republic, Hungary, and Poland, and both the UK and Russia. The adopted framework allows to analyze interdependence by estimating volatility spillovers, and also contagion by testing for possible shifts in the transmission of volatility following the introduction of the euro and EU accession. Further evidence on possible changes in the transmission mechanism (namely, on whether there is contagion) can be obtained by examining the conditional correlations implied by the estimated model over different time periods. The empirical findings suggest that there is significant co‐movement (interdependence) of these CEEC markets with both the Russian and the UK ones. Furthermore, whilst the introduction of the euro has had mixed effects, EU accession has resulted in an increase in volatility spillovers between the three CEECs considered and the UK (contagion).