Linkages and relationships between Emerging European and Developed Stock Markets before and after the Russian Crisis of 1997-1998

This paper examines the linkages between the Russian stock market and those of its largest neighbors in Central and Eastern Europe, and the world stock markets over the 10 year period 1995-2004. What we find is that there was a major change in the nature of these relationships after the so called Russian Crisis of 1997-1998. The nature of this change is such that we can no longer rely on the the traditional methods used to examine linkages between equity markets. Using a more appropriate set of tools we find that the major influences on the Russian stock market have become the equity markets of the European Union and the USA. There is very little evidence of influence from (or to) regional markets such as Poland or Hungary. Classification-Stock Market Integration, CEE Stock markets, Russian Stock Market, Cointegration

Linkages between international securitized real estate markets: Further evidence from time-varying and stochastic cointegration

This paper analyzes long-run co-movements between international real estate stock markets and between regions based on bivariate and multivariate tests for cointegration. While the topic has been analyzed in previous studies such as Gallo and Zhang (2009) and Yunus (2009) among others, this paper is of significant contribution to existing studies since we compare results from different cointegration methodologies and explicitly control for instability in cointegration relationships and deviations from normality. Furthermore, the analyzed time period is longer than in previous studies and ranges from 1990 to 2009 covering 20 years. In line with previous studies, the empirical results indicate several cointegration relationships between national real estate stock markets. However, it is also shown that most cointegration relationships are unstable and that the results from cointegration methodologies suggested by Engle and Granger (1987) and Johansen (1988) might be misleading in that common long-run comovements appear to be stronger when structural breaks are considered. Thus, the results indicate that investors would benefit from broadening their investment horizon from their domestic continent to international markets. This particularly applies for the European securitized real estate markets. --international securitized real estate markets,diversification,time-varying cointegration,stochastic cointegration

Russian equity market linkages before and after the 1998 crisis: Evidence from time-varying and stochastic cointegration tests

This paper examines the relationships between the Russian and other Central European (CE) and developed countries’ equity markets over the 1995-2004 period. Along with the traditional Johansen and Juselius (1990) multivariate cointegration tests, we apply novel cointegration approaches, including Gregory-Hansen (1996) test, which allows for a structural break in the relationships, as well as the newly developed stochastic cointegration test by Harris, McCabe and Leybourne (2002) and the non-parametric cointegration method of Breitung (2002). The latter tests point to a significant agreement that in the aftermath of the Russian crisis of 1998 there was an increasing degree of comovements of the Russian market with other developed markets, but not with CE developing markets. This result is further confirmed by dynamic conditional correlation modeling, which allows us to investigate graphically the evolution of comovements in the system. The results of detailed cointegration analysis suggest a. that the time-varying nature of equity markets comovements should be explicitly accounted for while modeling long run relationships b. that there is a decline in diversification benefits for foreign investors seeking to invest in Russian equities over the long horizon.Stock Market Integration; CEE Stock markets; Russian Stock Market; Cointegration

CEE Banking Sector Co-Movement: Contagion or Interdependence?

We study the evolution of global equity market integration using US dollar denominated iShares. Designed to mimic the movements of MSCI indices, these securities provide an easy pool of international diversification products for the investor. As such they allow us to conduct an analysis of the largest equity markets comovements devoid of problems associated with trading restrictions, exchange rates fluctuations and non-synchronous trading. In contrast to most of the previous studies, we apply time varying methodology for the analysis of both short-term and long-term comovements that provide detailed evidence on the pattern and dynamics of the equity market linkages. We find evidence in favour of increasing conditional correlations for all of the markets since 2001. Time-varying and recursive cointegration tests provide somewhat weak evidence in favour of the presence of bivariate cointegration relationships, but stronger evidence in the multivariate case, suggesting limited diversification opportunities for the U.S. based investor in the long run.Stock Market Integration, G7 Stock markets, Cointegration, GARCH

Size, value and liquidity : do they really matter on an emerging stock market?

The paper extends the evidence on the factors relevant for pricing stocks in emerging markets. While previous literature focused on Latin American and Asian developing markets, Central and Eastern European markets remain under-researched. By focusing on the Polish stock market, we aim to fill in a gap in the asset pricing literature and draw attention to these previously overlooked markets. In addition to analyzing the importance of the most prominent risk-factors such as market, size and book-to-market value, we investigate whether liquidity plays a role in pricing Polish stocks. To test this conjecture we use the largest array of liquidity measures that has been used in the literature to date. We take advantage of a hand-collected dataset covering the longest period studied so far in case of the this market. Our results support existing evidence for developed markets with regard to the market, size, and book-to-market factor. However, in contrast to studies on other emerging markets, we do not find convincing evidence in favour of the liquidity risk premium on the Polish stock market. This result is robust across various liquidity measures and time periods. Analyzing specific characteristics of the Polish market, we consider possible explanations behind this finding

Pension funds' performance in strongly regulated industries in Central Europe: Evidence from Poland and Hungary

This paper presents an analysis of pension funds' performance in Poland and Hungary, two Central European countries characterized by strong regulation of their private pension fund industries. Thus, the paper extends the literature which has so far mostly focused on performance of pension fund industries facing no or limited regulation. We find that the performance of pension funds in the two studied countries differs. While we do not find convincing evidence of outperformance by Polish pension funds, we find strong evidence of underperformance by Hungarian pension funds. The results are robust to time-variation. The paper considers possible explanations behind these findings. The results of the paper should be of interest for policy-makers seeking to achieve optimal performance of the pension systems and academics in the research area of pension funds. --pension fund management,investment and performance regulation,performance measurement,Central European stock markets,Emerging Markets

Linkages between international securitized real estate markets : further evidence from time-varying and stochastic cointegration

This paper analyzes long-run co-movements between international real estate stock markets and between regions based on bivariate and multivariate tests for cointegration. While the topic has been analyzed in previous studies such as Gallo and Zhang (2009) and Yunus (2009) among others, this paper is of significant contribution to existing studies since we compare results from different cointegration methodologies and explicitly control for instability in cointegration relationships and deviations from normality. Furthermore, the analyzed time period is longer than in previous studies and ranges from 1990 to 2009 covering 20 years. In line with previous studies, the empirical results indicate several cointegration relationships between national real estate stock markets. However, it is also shown that most cointegration relationships are unstable and that the results from cointegration methodologies suggested by Engle and Granger (1987) and Johansen (1988) might be misleading in that common long-run comovements appear to be stronger when structural breaks are considered. Thus, the results indicate that investors would benefit from broadening their investment horizon from their domestic continent to international markets. This particularly applies for the European securitized real estate markets

Does Regulation Hurt Pension Funds' Performance? Evidence from Strongly Regulated Pension Fund Industries

This paper presents an analysis of pension funds’ performance in Poland and Hungary as representative Eastern Central European countries. In the theoretical literature it is argued that investment limits and performance regulations may have a negative influence on the performance of funds. In particular for Poland, our empirical findings do not support this prediction. Consequently, strict regulations do not necessarily harm the performance of the pension funds.

Pension funds performance in strongly regulated industries in Central Europe : evidence from Poland and Hungary

This paper presents an analysis of pension funds' performance in Poland and Hungary, two Central European countries characterized by strong regulation of their private pension fund industries. Thus, the paper extends the literature which has so far mostly focused on performance of pension fund industries facing no or limited regulation. We find that the performance of pension funds in the two studied countries differs. While we do not find convincing evidence of outperformance by Polish pension funds, we find strong evidence of underperformance by Hungarian pension funds. The results are robust to time-variation. The paper considers possible explanations behind these findings. The results of the paper should be of interest for policy-makers seeking to achieve optimal performance of the pension systems and academics in the research area of pension funds

Re-assessing co-movements among G7 equity markets: evidence from iShares

iShares funds are products designed to mimic the movements of MSCI stock market indices. Being devoid of problems associated with trading restrictions, exchange-rate fluctuations and non-synchronous trading, iShares data are better suited for measuring, firstly, equity-market co-movements and, secondly, diversification potential than national indices data; the latter data are used by most of the studies in the area. Applying recent time-varying methodology for the analysis of short- and long-term co-movements, a detailed analysis of the dynamics of the equity market linkages over the period 1996-2005 is provided. Evidence is found of increasing conditional correlations and significant time-varying long-run relationships between the US and the majority of other G7 markets since 2001, as measured by iShares. However, the extent of both short-term and long-term linkages between the G7 equity markets is lower for national indices data. Our findings suggest that (i) the results of earlier studies that are based on stock market indices should be interpreted with caution, since using these may overestimate the extent of available diversification benefits; and (ii) iShares funds do not represent perfect diversification products. These results appear to be robust to alternative model specifications, data frequency and conditioning bias