Munich Personal RePEc Archive

Country effects in CEE3 stock market networks: a preliminary study

Výrost, Tomáš (2012): Country effects in CEE3 stock market networks: a preliminary study.

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The stock markets in the Czech Republic, Poland and Hungary (CEE3) are studied in the context of stock market networks. A total of 17 shares are followed during the period of 1998 – 2012. The daily returns are used for calculation of rolling correlations of various window lengths. The resulting correlation matrices are then used to construct network models. Minimum spanning trees (MST) are used as a form of abstraction in the graph structure, and their evolution is studied over time. The main objective of the paper is to test whether the individual assets cluster in the MSTs by the country to which they belong or whether the origin is of lesser importance, leading to cross-country links within the MSTs. The latter might hint at increasing integration within CEE3 stock markets. We find that at the beginning of the series, the MSTs exhibited very strong country clustering, which changed in the later 2000s. The country effects do not seem to be synchronized between all markets.

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