Time-frequency nexus between the Eastern European and the developed stock markets: The case of Visegrad group

Abstract

This paper determines the level of interrelationship between the four stock markets of Visegrad group and the two major developed stock markets (Germany and the US). We endeavor to stipulate the dynamic connection via time domain as well as frequency domain, and for that purposs we apply wavelet coherence methodology. The results indicate that dark-red areas prevail around the World financial crisis and the European sovereign debt crisis, and they exist even at the high frequency areas (4 days) at DAX-PX and DAX-WIG, and somewhat DAX-BUX pairs. It is an indication of strong links between Visegrad group and DAX index, while the ties with the American index are slightly weaker. Slovakian SAX index has the widest areas of low correlation, whereas the presence of contagion cannot be found. This finding suggests that the Slovakian SAX index has the least synchronized movements with the two major stock indices, and thus can be used for diversification purposes in portfolios with DAX and S&P500.

Spillover effects and transmission of shocks in Visegrad equity markets

“…Specifically, they suggest differences between the Slovakian and non-Eurozone countries, highlighting the impact of the US subprime market, the sovereign debt crisis and the Brexit referendum. The interrelationships between the V4 and the Western equity markets have also been explored by Živkov et al (2019). Their findings indicate multiple connections between V4 exchanges at various frequency shocks.…”

Commonalities in Returns in the Stock Markets of the Visegrad Group: A Quantile Coherency Approach

“…Previous studies related to dynamics and linkages between the stock markets of the Visegrad Group have mainly focused on the interrelationships, the level of integration and contagion effects with the developed stock markets (Wang and Moore, 2008;Syllignakis and Kouretas, 2011;Gjika and Horváth, 2013;Baumöhl, 2013;Boţoc, 2017;Horváth et al, 2018;Živkov et al, 2019;Boţoc and Anton, 2020;Tilfani et al, 2020). For example, Wang and Moore (2008) used DCC-GARCH model and found, that correlation between CEE stock markets and aggregate Eurozone market increased during the financial crises and after EU accession.…”