Stock market crises and portfolio diversification in Central and Eastern Europe

Managerial Finance - 2006
PlamenPatev1, NigokhosKanaryan1, KaterinaLyroudi2
1D Tsenov Academy of Economics, Department of Finance and Credit, Svishtov, Bulgaria
2Department of Accounting and Finance, University of Macedonia, Thessaloniki, Greece

Tóm tắt

PurposeTo investigate the Central and Eastern European (CEE) equity market co‐movements before, during and after major emerging market crises. To examine the impact of the crisis on the gains of international portfolio diversification in CEE.Design/methodology/approachThe study is based on the concept of co‐integration. The daily US dollar returns are analyzed for the period August 28, 1996 to August 2, 2001. The whole period is split into three sample periods. The first one is the pre‐crisis period from August 28, 1996 to May 30, 1997. The crisis period is from June 2, 1997 to January 31, 1999. The third period is the post‐crisis from February 1, 1999 to August 31, 2001.FindingsIndicates no long‐run relationship between the US and the four Central European stock markets. Demonstrates a feedback effect and causality in one direction during and after the crisis period. Confirms a decrease of portfolio benefits in the crisis period and an increase of portfolio benefits in the post‐crisis period.Research limitations/implicationsIt is based on econometrics tests that quantify market integration and measure opportunities for international portfolio diversification. Employment of asset pricing models is viewed as a future research.Practical implicationsA very useful source of information for investors in Central and Eastern Europe.Originality/valueOne of the first papers investigated the benefits from portfolio investments in Central and Eastern Europe stock markets during financial crises.

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