Panait, Iulian and Slavescu, Ecaterina Oana (2011): Volatility and causality study of the daily returns on the Bucharest Stock Exchange during 2007-2011. Published in: Proceeding of the 17th International Conference The Knowledge-Based Organization – Economic, Social and Administrative Approaches to the Knowledge-Based Organization (October 2011): pp. 292-300.
Download (168kB) | Preview
International capital markets tend to be characterized by volatility, which is always a function of world economic and political environment and is frequently associated with contagion risk and increased cross-market linkages. This phenomenon affects both developed markets and emerging markets, and, being integrated in the context of international financial markets through the globalization process, Romanian capital market could not avoid external influencing factors amplificated by economic recession. We have analyzed the the influence of the international capital markets on the evolution of Bucharest Stock Exchange during 2007-2011 in two separate periods (during the 2007-2009 crisis and after the crisis), using correlation analysis and Granger causality tests on daily data. Our main interest was to see if and how the behavior of the Bucharest Stock Exchange was different during the crisis and after the crisis and how the volatility of the Romanian market changed in the post crisis period. Our results confirmed the high degree of interconnectivity between financial markets revealed by general theory, showing that there was a high degree of correlation between the Romanian stock market and international markets during the 2007-2009, but afterwards the intensity of this correlation slightly declined. Another conclusion was that during the whole 2007-2011 period there was a clear one-way causality induced from the international capital markets towards Bucharest Stock Exchange.
|Item Type:||MPRA Paper|
|Original Title:||Volatility and causality study of the daily returns on the Bucharest Stock Exchange during 2007-2011|
|Keywords:||data mining, Granger, correlation, crisis, stock markets, volatility|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
G - Financial Economics > G0 - General > G01 - Financial Crises
|Depositing User:||Iulian Panait|
|Date Deposited:||07. Oct 2012 23:29|
|Last Modified:||12. Feb 2013 07:54|
Aggarwal, R.. Inclan, C., Leal, R.(1999), “Volatility in emerging stock markets”, Journal of Financial and Quantitative Aanalysis, volume 34, issue 1, pag. 33-55
Arshanapalli, B. G., Doukas, J. (1993), “International stock market linkages: Evidence from the pre- and post-october 1987 period”, Journal of Banking and Financ, volume 17, pag.193-208.
Bekaert, G., Harvey C.R. (1997), “Emerging Equity market volatility”, Journal of Financial Economics, volume 43, pag. 29-77
Bekaert, G., Harvey, C.R., Ng, A. (2005), “Market integration and contagion”, Journal of Business, volume 78, issue 1, pag. 39-69
Calvo, S., Reinhart, C. M. (1996), “Capital flows to Latin America: Is there evidence of contagion effects?”, In: Guillermo A. Calvo, Morris Goldstein and Eduard Hochreiter, eds.: Private Capi-tal Flows to Emerging Markets after the Mexican Crisis. Institute for International Economics, Washington DC.
Choe, H., Kho, B.C., Stulz, R.M. (1999), “Do foreign investors destabilize stock markets? The Korean experience in 1997”, Journal of Financial Economics, volume 54, issue 2, pag. 227-264
Cheung, Y. W., Lai, K.S. (1999), “Macroeconomic determinants of longterm stock market comovements among major EMS countries”, Applied Financial Economics, volume 9, pag.73-85.
Covaci, B., Panait, I. (2009), “Portfolio risk analysis using Garch model”, Proceeding of the American International Conference on Applied Mathematics – Recent Advances in Applied Mathematics, WSEAS, pag. 122-126
Darbar, D., Salim, M., Partha, D. (1997), “Co-movement in international equity markets”, Journal of Financial Research, volume 20, pag. 305-322.
Forbes, K.J., Rigobon, R., (2002), “No contagion, only interdependence: Measuring stock market comovements”, Journal of Finance, volume 57, issue 5, pag. 2223-2261
Francis, B., Leachman, L. (1998), “Superexogeneity and the dynamiclinkages among international equity markets”, Journal of International Money and Finance, volume17, pag. 475-492
Gelos, R.G., Sahay, R. (2001), “Financial market spillovers in transition economies”, Economics of Transition, volume 9, issue 1, pag. 53-86
Harrison, B., Lupu, R., Lupu, I. (2010), “Statistical Properties of the CEE Stock Market Dynamics. A Panel Data Analysis”, The Romanian Economic Journal, issue 37, pag. 41-54
Hartmann, P., Straetmans, S., de Vries, C.G. (2004), “Asset market linkages in crisis periods”, Review of Economics and Statistics, volume 86, issue 1, pag. 313-326
King, M.A.., Wadhwani, S. (1990), “Transmission of Volatility Between Stock Markets”, Review of Financial Studies, volume 3, issue 1, pag. 5-35
Lee, S.B., Kim, K.J. (1993), “Does the October 1987 crash strengthen the co-movements among na-tional stock markets?”, Review of Financial Economics, volume 3, pag. 89-102.
Lupu, R., Tudor, C. (2008), “Direction of change at the Bucharest Stock Exchange”, The Romanian Economic Journal, issue 27, pag. 165-185
Lupu, R., Lupu, I. (2009), “Contagion across Central and Eastern European Stock Markets: a Dynamic Conditional Correlation Test”, Economic Computation and Economic Cybernetics Studies and Research, volume 43, issue 4, pag. 173-186
Markwat, T., Kole, E., van Dijk D. (2009), “Contagion as a domino effect in global stock markets”, Journal of Banking & Finance, volume 33, issue 11, pag. 1996-2012
Maroney, N., Naka, A., Wansi, T. (2004), “Changing risk, return and leverage: The 1997 Asian financial crisis”, Journal of Financial and Quantitative Analysis, volume 39, issue 1, pag. 143-166
Panait I. (2011), “Study of the correlation between the Romanian stock market and S&P500 index during 2007-2009”, The Romanian Economic Journal, issue 39, pag. 233-255
Panait, I., Lupu, I. (2009), “The behavior of the Bucharest Stock Exchange during the current financial markets crisis and proposed measures for its sustainable development”, Annals of Spiru Haret University Annals – Economic Series, vol.1, issue 1, pag. 73-80
Pop, C., Curutiu, C. and Dumbrava, P. (2009), “Bucharest Stock Exchange – The effects of the current financial crisis”, Interdisciplinary Management Research V, pag. 805-818
Tudor, C. (2010), “Causal relationships among CEE stock markets. The impact of the global financial crisis”, Mathematical Models for Engineering Science, pag 238-243