Volatility Spillovers between Stock and Currency Markets: Evidence from Emerging Eastern Europe
Fedorova, Elena; Saleem, Kashif
Year: 2010 Volume: 60 Issue: 6 Pages: 519-533
Abstract: The purpose of this study is threefold. First, we look at the linkages between Eastern European emerging equity markets and Russia. Second, we investigate the relationships between the currency markets of Poland, Hungary, Russia, and the Czech Republic. Finally, we examine the interdependence between Emerging Eastern European and Russian equity and currency markets. We estimate a bivariate GARCH-BEKK model proposed by Engle and Kroner (1995) using weekly returns. We find evidence of direct linkages between the equity markets in terms of both returns and volatility, as well as in the currency markets. When analyzing the relationships between currency and stock markets we find unidirectional volatility spillovers from currency to stock markets. The results show clear evidence of integration of Eastern European markets within the region and with Russia as well.
JEL classification: C32, G15
Keywords: GARCH-BEKK, volatility spillovers, stock market, currency market, Emerging Eastern Europe, Russia
RePEc: http://ideas.repec.org/a/fau/fauart/v60y2010i6p519-533.html
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