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Panel GARCH Model with Cross-Sectional Dependence between CEE Emerging Markets in Trading Day Effects Analysis

Author

Listed:
  • Josip ARNERIĆ

    (University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia)

  • Blanka ŠKRABIĆ PERIĆ

    (University of Split, Faculty of Economics, Split, Croatia)

Abstract

The presence of the weekday effects of 10 emerging CEE stock markets is explored. Simultaneously, the cross-sectional dependence between daily returns of national stocks is controlled. Most of the previous studies neglect cross-sectional dependence in case of univariate analysis. Rare studies of the weekday effects include multivariate GARCH, considering only a few markets as it suffers from high dimensionality. Thus, we specify and estimate a panel GARCH with a relatively small number of parameters. Results indicate a strong presence of the Monday effect in both mean and variance equations, while the Tuesday effect is present only in the mean equation. Empirical findings also confirm the existence of the cross-sectional dependence, particularly dependence of Poland with Hungary, Czech and Croatia.

Suggested Citation

  • Josip ARNERIĆ & Blanka ŠKRABIĆ PERIĆ, 2018. "Panel GARCH Model with Cross-Sectional Dependence between CEE Emerging Markets in Trading Day Effects Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 71-84, December.
    • Handle: RePEc:rjr:romjef:v::y:2018:i:4:p:71-84
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    More about this item

    Keywords

    panel GARCH; time-varying covariance; market anomalies; emerging CEE markets; maximum likelihood estimates;
    All these keywords.

    JEL classification:

    • 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
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G1 - Financial Economics - - General Financial Markets

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