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Modeling Comovement among Emerging Stock Markets: The Case of Budapest and Istanbul

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Abstract

A double world index model is proposed as an ideal way of characterizing the comovement among emerging stock markets, and applied to Budapest-Istanbul as an interesting case. An exclusive increase in the correlation between Budapest and Istanbul during the recent crisis period is documented. To decompose this correlation into information dynamics, a structural vector autoregression (SVAR) model is employed which controls for global indices that enter the system exogenously. Istanbul and Budapest contain incremental information for each other after controlling for global factors, in particular during and after the recent global crisis. Impulse response results suggest significant lagged responses, which imply predictability. Istanbul appears to respond to global information faster.

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  • Numan Ülkü, 2011. "Modeling Comovement among Emerging Stock Markets: The Case of Budapest and Istanbul," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(3), pages 277-304, July.
    • Handle: RePEc:fau:fauart:v:61:y:2011:i:3:p:277-304
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    Cited by:

    1. Ceylan Onay & Gözde Ünal, 2012. "Cointegration and Extreme Value Analyses of Bovespa and the Istanbul Stock Exchange," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(1), pages 66-90, February.
    2. Silvo Dajcman, 2012. "The Dynamics of Return Comovement and Spillovers Between the Czech and European Stock Markets in the Period 1997–2010," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(4), pages 368-390, August.

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    More about this item

    Keywords

    comovement of stock markets; European emerging markets; structural VAR; world index model;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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