How smooth is the stock market integration of CEE-3?

We study the stock market integration of emerging CEE-3 stock markets (namely, the Czech, Hungarian, and Polish markets) and hypothesize that this process has been gradual over time. As a proxy for integration, co-movements with three stock market indices that represent the developed markets (i.e., MSCI Germany, the Dow Jones Euro Stoxx 50, and MSCI World) are estimated using the standard, asymmetric, and corrected DCC-GARCH model. A smooth transition logistic trend model is then fitted to the dynamic correlations to examine the integration process. Evidence of strengthening relationships among the markets under study is provided.http://deepblue.lib.umich.edu/bitstream/2027.42/132978/1/wp1079.pd

Volatility and dynamic conditional correlations of European emerging stock markets

This study examines the relationship between time-varying correlations and conditional volatility among eight European emerging stock markets and the MSCI World stock market index from January 2000 to December 2012. Correlations are estimated in the standard and asymmetric dynamic conditional correlation (DCC) model frameworks. The results can be summarized by three main findings: (1) asymmetry in volatility is not a common phenomenon in emerging markets; (2) asymmetry in correlations is found only with respect to the Hungarian stock market; and (3) the relationship between volatility and correlations is positive and significant in all countries included in the study. Thus, diversification benefits decrease during periods of higher volatility

Volatility and dynamic conditional correlations of European emerging stock markets

This study examines the relationship between time-varying correlations and conditional volatility among eight European emerging stock markets and the MSCI World stock market index from January 2000 to December 2012. Correlations are estimated in the standard and asymmetric dynamic conditional correlation (DCC) model frameworks. The results can be summarized by three main findings: (1) asymmetry in volatility is not a common phenomenon in emerging markets; (2) asymmetry in correlations is found only with respect to the Hungarian stock market; and (3) the relationship between volatility and correlations is positive and significant in all countries included in the study. Thus, diversification benefits decrease during periods of higher volatility

The Stock Markets and Real Economic Activity

The goal of this paper is to provide new evidence on the bidirectional relationships between economic activity indicators and stock market returns in four Central and Eastern European (CEE) countries: Poland, the Czech Republic, Hungary, and Slovakia. Using the single equation error correction model (SEECM) framework of cointegration analysis, the Engle-Granger two-step procedure, single-equation Granger causality tests, and the Toda-Yamamoto (1995) approach, this paper presents results for the Czech Republic, Poland, and Hungary that are generally in accordance with the present value theory of stock prices. Thus, the stock market indexes for these countries are leading indicators of the state of the real economy. However, as explained here, the results for Hungary must be interpreted with greater caution. In addition, as was expected, the results for Slovakia were very different from those of the other countries.