Stock market contagion in Central and Eastern Europe: unexpected volatility and extreme co-exceedance |
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Authors: | Roman Horváth Štefan Lyócsa Eduard Baumöhl |
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Affiliation: | 1. Institute of Economic Studies, Charles University, Prague, Czech Republicroman.horvath@gmail.com;3. Institute of Economics and Management, University of Economics in Bratislava, Ko?ice, Slovakia |
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Abstract: | We examine whether there is contagion from the US stock market to six Central and Eastern European stock markets. We use a novel measure of contagion that examines whether volatility shocks in the US stock market coupled with negative returns are followed by higher co-exceedance between US and emerging stock markets. Using our approach and controlling for a set of market-related variables, we show that during the period from 1998 to 2014, financial contagion occurred, that is, unexpected negative events in the US market are followed by higher co-exceedance between US and Central and Eastern European stock markets. Even though contagion is stronger during the financial crisis, it also occurs in tranquil times. |
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Keywords: | Contagion co-exceedance volatility stock markets |
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