Stock market contagion in Central and Eastern Europe: unexpected volatility and extreme co-exceedance*. Issue 5 (24th March 2018)

• Record Type: Journal Article
• Authors: Horváth, Roman; Lyócsa, Štefan; Baumöhl, Eduard
• Is Part Of: European journal of finance. Volume 24:Issue 5(2018)
• Page Start: 391
• Page End: 412
• Publication Date: 2018-03-24
• Subjects: Contagion -- co-exceedance -- volatility -- stock markets; G01 -- G14 -- G15; Finance -- Periodicals; Finance -- Europe -- Periodicals; International finance -- Periodicals; 332.094
• DOI: 10.1080/1351847X.2017.1307773
• Languages: English
• ISSNs: 1351-847X

Abstract

Abstract: We examine whether there is contagion from the US stock market to six Central and Eastern European stock markets. We use a novel measure of contagion that examines whether volatility shocks in the US stock market coupled with negative returns are followed by higher co-exceedance between US and emerging stock markets. Using our approach and controlling for a set of market-related variables, we show that during the period from 1998 to 2014, financial contagion occurred, that is, unexpected negative events in the US market are followed by higher co-exceedance between US and Central and Eastern European stock markets. Even though contagion is stronger during the financial crisis, it also occurs in tranquil times.