Volatility and asymmetric dependence in Central and East European stock markets
| Autor: | Thi Thuy Anh Vo, Nathan Lael Joseph, Sabur Mollah, Asma Mobarek |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
050208 finance
Autoregressive conditional heteroskedasticity 05 social sciences Tail dependence Monetary economics General Business Management and Accounting Accounting 0502 economics and business Financial crisis Economics media_common.cataloged_instance 050207 economics Developed market European union Volatility (finance) Finance Stock (geology) media_common European debt crisis |
| Zdroj: | Review of Quantitative Finance and Accounting. 55:1241-1303 |
| ISSN: | 1573-7179 0924-865X |
| DOI: | 10.1007/s11156-020-00874-0 |
| Popis: | We study the effects of contagion around the global financial crisis (GFC) and the Eurozone crisis periods using German and UK returns, each paired with returns from Central and East European (CEE) stock markets that recently joined the European Union (EU). Using bivariate vector error-correction models (VECMs) estimated in GARCH(1,1), we find strong support for long-run equilibrium conditions. This finding suggests that tests of tail dependence using differenced VARs may be mis-specified when long-run equilibrium conditions apply. Past news has more persistence on current volatility in CEE markets than in the developed markets. Past volatility has more persistence in the developed markets compared to the CEE markets. The T-V symmetrized Joe–Clayton (T-V SJC) copula outperforms all other copulas in goodness-of-fit, including, the T-V Gaussian and Student t copulas. This result is supported by a differenced VAR-GARCH (1,1). For CEE and developed market returns, no more than half of our market pairs exhibit significant increases in lower tail dependence, under the T-V SJC copula. Given the number of paired comparisons, the evidence on joint extreme dependence is weak. As such, CEE stock markets experienced little contagion effects during the GFC and Eurozone crisis periods, contrary to prior results. We find that the legal environment negatively impacts financial development, perhaps causing CEE and the EU markets to be isolated. |
| Databáze: | OpenAIRE |
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