期刊
GLOBAL BUSINESS REVIEW
卷 23, 期 2, 页码 259-286出版社
SAGE PUBLICATIONS LTD
DOI: 10.1177/0972150919869772
关键词
Stock markets; foreign exchange rate; CEE countries; multivariate GARCH; spillover effects
类别
This study empirically analyzes the dynamic relationship and volatility spillover effects between exchange rates and stock returns in five Central and Eastern European countries. The findings reveal different patterns of volatility transmission among the countries, which have significant implications for portfolio investments and currency risk hedging.
This article attempts to empirically analyze the dynamic relationship and volatility spillover effects between exchange rates and stock returns of the five Central and Eastern European (CEE) countries (Hungary, Poland, the Czech Republic, Romania and Croatia) covering the period 2000-2017 by using the bivariate generalized autoregressive conditional heteroskedasticity-Baba, Engle, Kraft and Kroner (GARCH-BEKK) framework alongside with the constant and dynamic conditional correlation (CCC and DCC) models. The major findings reveal the following: bidirectional volatility spillovers between the two financial markets in Hungary, the Czech Republic and Croatia in the pre-crisis period; unidirectional spillover of volatility from the stock market to foreign exchange market for Poland during the sub-prime crisis period; unidirectional spillover of volatility from the foreign exchange market to the stock market for Hungary in the post-crisis period and Romania in the pre-crisis period; non-persistence volatility spillover between them in case of the Czech Republic, Romania and Croatia in the post-crisis period; the absence of volatility transmission from the stock market to foreign exchange market occurs in Hungary, while from the foreign exchange market to the stock market in case of Poland in the post-crisis period. We further find a short-lived but non-negligible financial contagion between stock and foreign exchange market in these countries. These empirical insights have significant implications for portfolio investments and currency risk hedging.
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