Cointegration and conditional correlations among German and Eastern Europe equity markets

Guidi, Francesco and Gupta, Rakesh (2010): Cointegration and conditional correlations among German and Eastern Europe equity markets.

Abstract

This paper aims to examine the long term relationship between German and three Central and Eastern Europe (CEE) equity markets. Application of Johansen as well as Engle-Granger cointegration tests show that there is no long-term relationship among these markets while the Gregory-Hansen cointegration test rejects the null hypothesis of no cointegration with structural break. An additional objective is to capture the time-varying correlation among these markets through the dynamic conditional correlation models. Empirical results suggest that correlations increased after the accession of the CEE countries into the European Union.

• Item Type: MPRA Paper
• Language: English
• Keywords: Equity markets; Cointegration; Dynamic conditional correlation models.
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes

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