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Modelling volatility spillovers, cross-market correlation and co-movements between stock markets in European Union: an empirical case study

    Jatin Trivedi Affiliation
    ; Cristi Spulbar Affiliation
    ; Ramona Birau Affiliation
    ; Amir Mehdiabadi Affiliation
DOI:

Abstract

Purpose – This article examines volatility spillovers, cross-market correlation, and comovements between selected developed and former communist emerging stock markets in the European Union. Modelling the behavioural dynamics of European stock markets represents a vital topic in a fascinating context, but also a current challenge of great interest.


Research Methodology – We propose to estimate and model volatility using GARCH family models for selected European markets. We aim to explore volatility movement, presence of leverage effect/ asymmetry in selected financial markets.


Findings – The econometric approach includes GARCH (1, 1) models for the sample period from 1, January 2000 to 12, July 2018. The empirical results revealed that exists a significant presence of volatility clustering in all selected financial markets except Poland and Croatia. The empirical analysis also indicates that both recent and past news generate a considerable impact on present volatility.


Research limitations – Our empirical study has certain limitations regarding the relatively small number of only eight stock markets.


Practical implications – It can provide a useful perspective for researchers, academics, investors, investment managers, decision-makers, and scientists.


Originality/Value – The empirical analysis is focused on 8 European stock markets, which are classified as developed (Spain, UK, Germany, and France) and emerging (Poland, Hungary, Croatia, and Romania).

Keyword : volatility spillover, GARCH family models, stock market dynamics, investor behaviour, diversification, news

How to Cite
Trivedi, J., Spulbar, C., Birau, R., & Mehdiabadi, A. (2021). Modelling volatility spillovers, cross-market correlation and co-movements between stock markets in European Union: an empirical case study. Business, Management and Economics Engineering, 19(1), 70-90. http://doi.org/10.3846/bmee.2021.13588
Published in Issue
Mar 19, 2021
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