Abstract: This paper examines long and short-run relationships among three emerging Balkan stock markets (Romania, Bulgaria and Croatia), two developed European stock markets (Germany and Greece) and United States (U.S.), during the period 2000 - 2005. We apply Johansen's (1988) cointegration methodology to test the long-run relationships between these markets and Granger's (1969) causality methodology in order to capture short-run cointegration. Our findings are mixed. We provide evidence on long-run relationships between the Bulgarian and Croatian stock markets and the developed markets. On the other hand, there is no any cointegration among the developed markets and the Romanian market. Moreover, there is no cointegrating relationship among the three regional emerging markets, while short-run relationships exist only among the region. These results have crucial implications for investors regarding the benefits of international portfolio diversification.
Abstract: This paper explores the evolution of European stock markets integration with the US stock market, after the formation of European Monetary Union (EMU). To this end, we employ a dynamic version of international CAPM in the absence of purchasing power parity. The conditional covariance matrix of asset returns is estimated employing a parsimonious diagonal BEKK multivariate GARCH-in-mean model. The data sample is daily extending from June 1994 to June 2009. The introduction of world-wide information variables into the system reveals that the formation of monetary union has not exerted positive influence on EMU markets integration with US stock market. Moreover at the same time rolling estimates show that member states domestic or idiosyncratic risks have exhibited a lower volatility level.
Abstract: This paper examines the volatility spillover effects among Mediterranean equity
markets and investigates the effects of the 2007 financial crisis. German, Greek, Spanish,
Italian and Portuguese markets are investigated. German market is used as a benchmark
market. We employ a multivariate generalised autoregressive conditional heteroskedasticity
(MGARCH) model to identify the direction and magnitude of volatility spillovers. By
using a sample of daily data from 1994 to 2009, we find evidence that before the global
crisis begins, the largest impact in Mediterranean markets had the Germany market. In
post-crisis period, Spain had the higher spillover effects between the other markets,
followed by Germany, Italy, Portugal and Greece. Our results have implications for
investors, policy makers, entrepreneurs and academicians.
Abstract: We empirically investigate the relationship between expected stock returns and volatility in the twelve EMU countries as well as five major out of EMU international stock markets. The sample period starts from December 1992 until December 2007 i.e. up to the recent financial crisis. Empirical results in the literature are mixed with regard to the sign and significance of the mean – variance tradeoff. Based on parametric GARCH in mean models we find a weak relationship between expected returns and volatility for most of the markets. However, using a flexible semi-parametric specification for the conditional variance, we unravel significant
evidence of a negative relationship in almost all markets. Furthermore, we investigate a related issue, the asymmetric reaction of volatility to positive and negative shocks in stock returns confirming a negative asymmetry in almost all markets.
