A Time Varying Parameter Model to Test for Predictability and Integration in the Stock Markets of Transition Economies

Rockinger, Michael; Urga, Giovanni

doi:10.1198/07350010152472634

Cited by 98 publications

(60 citation statements)

References 22 publications

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“…Studies have generally shown that stock markets in the CEE countries are efficient (see for example Harrison and Paton 2005, Ajayi, Mehdian and Perry 2004, and Rockinger and Urga 2001 and the recent enlargement of the EU to include ten countries from CEE (Bulgaria, the Czech Republic, Estonia, Hungary, Poland, Latvia, Lithuania, Romania, Slovakia, Slovenia) therefore provides a unique opportunity to investigate the extent of stock market comovement in the enlarged EU.…”

Section: Introductionmentioning

confidence: 99%

Spillover effects from London and Frankfurt to Central and Eastern European stock markets

Harrison

Moore

2009

Applied Financial Economics

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This article investigates comovement in stock markets between the emerging economies of Central and Eastern Europe (CEE) and the developed markets of Western Europe. Three approaches are employed to examine this issue. The first two approaches, time-varying realized correlation ratios and cointegration statistics, use a two-step technique to derive time-varying estimates of the comovement between returns on CEE and EU stock exchanges. The first step uses common factor analysis to define the factors driving CEE stock exchanges, while the second step evaluates the relationship between the leading principal factor for CEE countries and the Deutsche Aktien Xchange (DAX) and Financial Times Stock Exchange (FTSE) using time-varying realized correlation and rolling cointegration statistics. The third approach employs Multivariate Generalized Autoregressive Conditional Heteroscedasticity (MGARCH) techniques to obtain estimates of mean and variance spillover effects.

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Section: Introductionmentioning

confidence: 99%

Spillover effects from London and Frankfurt to Central and Eastern European stock markets

Harrison

Moore

2009

Applied Financial Economics

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“…As shown in Rockinger and Urga (2001), a CAPM model with the beta behaving as a random walk provides satisfactory results with good significance levels of the parameters. In Brazil, Fischberg Blank et al (2014) also modeled the evolution of betas through a random walk that included conditioning variables (return of the market portfolio, term spread, exchange rate fluctuations and inflation); this for portfolio returns classified by size and by book-to-market.…”

Section: Capm Model With Beta As Random Walkmentioning

confidence: 87%

Goodness-of-Fit versus Significance: A CAPM Selection with Dynamic Betas Applied to the Brazilian Stock Market

Ronzani

Candido

Maldonado

2017

IJFS

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Abstract:In this work, a Capital Asset Pricing Model (CAPM) with time-varying betas is considered. These betas evolve over time, conditional on financial and non-financial variables. Indeed, the model proposed by Adrian and Franzoni (2009) is adapted to assess the behavior of some selected Brazilian equities. For each equity, several models are fitted, and the best model is chosen based on goodness-of-fit tests and parameters significance. Finally, using the selected dynamic models, VaR (Value-at-Risk) measures are calculated. We can conclude that CAPM with time-varying betas provide less conservative VaR measures than those based on CAPM with static betas or historical VaR.

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“…More recently, Gelos and Sahay (2001) examine the correlation between weekly stock returns in transition countries and those in other developing economies. Of most relevance to this paper, Rockinger and Urga (2000) and Rockinger and Urga (2001) examine the efficiency of the Czech, Polish, Hungarian and Russian stock markets, focusing on whether these markets become more efficient and more integrated with better established markets over time. There are many reasons to suppose that the efficiency of capital markets in transition economies will increase over time.…”

Section: Introductionmentioning

confidence: 99%

“…In these circumstances the actions of market participants are unlikely to accord with the efficient market paradigm. Following Rockinger and Urga (2001), we argue that the evolving efficiency in transition economies cannot be properly examined without an assessment of changes in time varying volatility.…”

Section: Introductionmentioning

confidence: 99%

Transition, the Evolution of Stock Market Efficiency and Entry into EU: The Case of Romania

Harrison

Paton

2004

Econ Change

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In this paper we demonstrate that the measurement of stock market efficiency is an important activity in establishing whether eastern European countries satisfy the Copenhagen Criteria for EU membership. Specifically, we argue that developing an efficient stock market should be an important policy focus for countries with aspirations to join the EU as it helps to demonstrate the existence of a functioning market economy. We illustrate this issue by examining the evolution of stock market efficiency in the Bucharest Stock Exchange from its inception until September 2002. We use a GARCH model on daily price data and model the disturbances using the Student-t distribution to allow for 'fat-tails'. We find strong evidence of inefficiency in the Bucharest Stock Exchange in that the lagged stock price index is a significant predictor of the current price index. This result is robust to the inclusion of variables controlling for calendar effects of the sort that have been observed in more developed stock markets. The level of inefficiency appears to diminish over time and we find evidence consistent with stock market efficiency in Romania after January 2000.JEL Classifications: G14; P34.

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A Time Varying Parameter Model to Test for Predictability and Integration in the Stock Markets of Transition Economies

Cited by 98 publications

References 22 publications

Spillover effects from London and Frankfurt to Central and Eastern European stock markets

Spillover effects from London and Frankfurt to Central and Eastern European stock markets

Goodness-of-Fit versus Significance: A CAPM Selection with Dynamic Betas Applied to the Brazilian Stock Market

Transition, the Evolution of Stock Market Efficiency and Entry into EU: The Case of Romania

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