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An Empirical Analysis of the Diffusion of Information across Stock Markets of Central and Eastern Europe

Author

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  • Ovidiu Stoica
  • Mark J. Perry
  • Seyed Mehdian

Abstract

In this paper, we examine the efficiency of the transmission of information across the stock markets of Bulgaria, the Czech Republic, Hungary, Poland, Romania, and Slovakia, as well as the relative importance and influence of advanced equity markets of Germany and France on the abovementioned markets. The analysis is carried out using maximum likelihood regressions, Generalized Autoregressive Conditional Heteroskedastic (GARCH) models, and vector autoregression (VAR) estimations. The empirical results suggest that the Central and Eastern European stock markets react to the arrival of price innovations from Germany and France, but national stock market price innovations account for more error variance compared to those of Germany and France, and generally show an increasing responsiveness over time, which could be interpreted as progress in the European financial integration.

Suggested Citation

  • Ovidiu Stoica & Mark J. Perry & Seyed Mehdian, 2015. "An Empirical Analysis of the Diffusion of Information across Stock Markets of Central and Eastern Europe," Prague Economic Papers, Prague University of Economics and Business, vol. 2015(2), pages 192-210.
    • Handle: RePEc:prg:jnlpep:v:2015:y:2015:i:2:id:508:p:192-210
    DOI: 10.18267/j.pep.508
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    References listed on IDEAS

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    1. Markus Baltzer & Lorenzo Cappiello & Roberto A. De Santis & Simone Manganelli, 2008. "Measuring financial integration in new EU member states," Occasional Paper Series 81, European Central Bank.
    2. Barry Harrison & Winston Moore, 2009. "Spillover effects from London and Frankfurt to Central and Eastern European stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 19(18), pages 1509-1521.
    3. Thomas Dimpfl & Robert C. Jung, 2012. "Financial market spillovers around the globe," Applied Financial Economics, Taylor & Francis Journals, vol. 22(1), pages 45-57, January.
    4. Richard Ajayi & Seyed Mehdian & Mark Perry, 2010. "The relative influence of the East and the West on Middle Eastern emerging stock markets: an empirical investigation," Applied Financial Economics, Taylor & Francis Journals, vol. 20(5), pages 407-415.
    5. De Santis, Roberto A. & Cappiello, Lorenzo & Baltzer, Markus & Manganelli, Simone, 2008. "Measuring financial integration in new EU Member States," Occasional Paper Series 81, European Central Bank.
    6. Gerry Dickinson, 2000. "The Implications of Lower Interest Rates for Insurers: A Comment," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 25(1), pages 59-62, January.
    7. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
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    Citations

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    Cited by:

    1. Dragan Tevdovski & Viktor Stojkoski, 2021. "What is Behind Extreme Negative Returns co-movement in the South Eastern European Stock Markets?," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 68(1), pages 43-61, March.
    2. Dejan ŽIVKOV & Jovan NJEGIĆ & Ivan MILENKOVIĆ, 2018. "Interrelationship between DAX Index and Four Largest Eastern European Stock Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 88-103, September.
    3. Tihana Škrinjarić, 2022. "Higher Moments Actually Matter: Spillover Approach for Case of CESEE Stock Markets," Mathematics, MDPI, vol. 10(24), pages 1-34, December.
    4. Qunfeng LIAO & Seyed MEHDIAN & John STEPHENS, 2016. "The Impact Of The 2008 Global Financial Crisis On The Structure Of The Transmission Of Price Innovations Across Financial Markets: The Case Of Southwest Asian Equity Markets," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 63(2), pages 195-208, July.
    5. Liao Qunfeng & Mehdian Seyed & Stephens John, 2016. "The Impact of the 2008 Global Financial Crisis on the Structure of the Transmission of Price Innovations Across Financial Markets: The Case of Southwest Asian Equity Markets," Scientific Annals of Economics and Business, Sciendo, vol. 63(2), pages 195-208, June.
    6. Bogdan, Sinisa & Baresa, Suzana & Ivanovic, Zoran, 2016. "Domestic Vs International Risk Diversification Possibilities In Southeastern European Stock Markets," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 7(2), pages 197-208.
    7. Ani Stoykova & Mariya Paskaleva, 2018. "Correlation Dynamics between Southeast European Capital Markets," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 49-82.

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    More about this item

    Keywords

    European integration; diffusion of information; integration of equity markets; entral and Eastern European countries;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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