Preliminary communication
INTERDEPENDENCE BETWEEN THE SLOVENIAN AND EUROPEAN STOCK MARKETS – A DCC-GARCH ANALYSIS
SILVO DAJČMAN
MEJRA FESTIĆ
Abstract
This paper examines the comovement and
spillover dynamics between the Slovenian
and some European (the UK, German,
French, Austrian, Hungarian and the
Czech) stock market returns. A dynamic conditional
correlation GARCH (DCC-GARCH) analysis is
applied to returns series of representative national
stock indices for the period from April 1997 to May
2010 to answer the following questions: i) Is correlation
(comovement) between the Slovenian and European
stock markets time-varying; ii) Are there return and
volatility spillovers between European and Slovenian
stock markets; iii) What effect did financial crises in
the period from April 1997 to May 2010 have on the
comovement between the investigated stock markets?
Results of the DCC-GARCH analysis show that
comovement between Slovenian and European stock
markets is time-varying and that there were significant
return spillovers between the stock markets. Financial
crises in the observed period increased comovement
between Slovenian and European stock markets.
Keywords
stock markets; DCC-GARCH; Slovenia; return comovement; stock market volatility
Hrčak ID:
86642
URI
Publication date:
15.6.2012.
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