Prague Economic Papers 2007, 16(4):291-302 | DOI: 10.18267/j.pep.309
Dynamic Analysis of Selected European Stock Markets
- University of Economics, Faculty of Informatics and Statistics, Prague (tresl@vse.cz, blatna@vse.cz).
The behaviour of selected European stock indices in the period 2001-2005 was analysed. UKX (GB), DAX (Germany), CAC (France) and MIBTEL (Italy) represented well established West European markets, whereas PX-50 (Czech Republic), SKSM (Slovak Republic), BUX (Hungary) and WIG (Poland) were the examples of Central European emerging ones. The subject of this analysis were logarithmic daily returns computed from closing values of corresponding indices. Cross correlation function reached typical values 0.7 (West Europe) and 0.4 (Central Europe) excepting the Slovak Republic. The patterns of both common and solitary movements were revealed with the use of principal component and cluster analysis. To establish some dynamical relations in return time-series, vector autoregression models and Granger causality tests were employed. As for West Europe, the causal chain UKX_MIBTEL_DAX_CAC was revealed. On the other hand, the form of this chain for Central Europe was PX-50_BUX_WIG. Finally, the behaviour of both BUX and WIG returns was strongly determined by all West European counterparts.
Keywords: return modelling, stock indices, inancial time series, Granger causality
JEL classification: C32, G15
Published: January 1, 2007 Show citation
References
- Alexander, C. (2001), "Market Models." Wiley.
- Cipra, T. (1986), "Analýza časových řad s aplikacemi v ekonomii." Praha : SNTL.
- Engle, R. (1995), "ARCH (Selected Readings)." Oxford : Oxford University Press.
- Evans, M., Hastings, N., Peacock, B. (1993), "Statistical Distributions." Wiley.
- Fama, E.F. (1968), "Risk, Return and Equilibrium: Some Clarifying Comments." Journal of Finance, 23 (1), pp. 29-40.
Go to original source...
- Hamilton, J.D. (1994), "Time Series Analysis." Princeton : Princeton University Press.
- Hull, J.C. (2006), "Options, Futures and Other Derivatives." Prentice Hall.
- Johnson, N., Kotz, S., Balakrishnan, N. (1995), "Continuous Univariate Distributions." Wiley.
- Markowitz, H. (1952), "Portfolio Selection." Journal of Finance, 7 (1), pp. 77-91.
Go to original source...
- Mossin, J. (1966), "Equilibrium in a Capital Asset Market." Econometrica, 34 (4), pp. 768-783.
Go to original source...
- Nelson, D.B. (1991), "Conditional Heteroskedasicity in Asset Returns: A New Approach." Econometrica. 59, pp. 347-370.
Go to original source...
- Sharpe, W.F. (1964), "Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk." Journal of Finance, 19 (3), pp. 425-442.
Go to original source...
- Sharpe, W.F., Alexander, G.J. (1990), "Investments." Prentice Hall.
- Solnik, B. (1996), "International Investments." Addison-Wesley.
- Tsay, R.S. (2002), "Analysis of Financial Time Series." Wiley.
Go to original source...
This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.