Central European Markets Research Articles

Short-Term Shocks Between Central European Stock Markets: An Approach During The 2020 and 2022 Events

<p><big>Stock indexes are used as a barometer of economic health, and fluctuations in these markets can have a substantial influence on the economy. For example, the Covid-19 pandemic caused severe economic disruption, as reflected in stock market indexes. Similarly, Russia's invasion of Ukraine has geopolitical implications that might undermine global trade and economic stability, impacting stock market indexes. Considering these developments, the purpose of this article is to examine the co-movements of the stock markets of Austria (ATX), Poland (WIG), the Czech Republic (PX Prague), Hungary (BUX), Croatia (CROBEX), Serbia (BELEX 15), Romania (BET), and Slovenia (SBI TOP) from February 16, 2018, to February 15, 2023. To achieve the research objectives, the aim is to answer the following research question: i) Have the events of 2020 and 2022 accentuated the co-movements between the stock markets in Central Europe? The results show the presence of 21 shocks between markets (out of a potential 56) during the Tranquil subperiod, with the WIG stock index having a greater predictive influence on the behavior of its peers (4 shocks out of 7 possible). During the Stress subperiod, 45 shocks were confirmed (out of 56 possible). The markets that triggered the most market shocks (7 out of 7 possibilities) were BET, BUX, CROBEX, and SBI TOP. The research question was validated based on the conclusion supplied, as all markets increased their movements, showing a considerable effect of the 2020 and 2022 events on these markets.</big></p>

Volatility Connectedness on the Central European Forex Markets

Volatility Connectedness on the Central European Forex Markets

The Dynamics of Beech Roundwood Prices in Selected Central European Markets

The European beech (Fagus sylvatica L.) is the most prevalent deciduous tree species in Central Europe. The implementation of sustainable, close-to-nature silvicultural practices increased the percentage share of beech in forest species composition, raising the economic significance of beech roundwood, especially in terms of revenues from timber sales. The elucidation of roundwood price mechanisms as well as long-term equilibrium relations between international markets may be helpful in calculating the profitability of beech roundwood production. The study material consists of quarterly time series of beech roundwood prices from Austria, Czechia, Germany, Poland, Slovakia, and Slovenia in the years 2005–2018. The price time series were described with a multiplicative model incorporating seasonal, cyclical, and irregular, as well as long-term trend components. The time series were decomposed using the Census X11 method. Stationarity was tested by means of the augmented Dickey–Fuller test (ADF) and the Kwiatkowski–Phillips–Schmidt–Shin test (KPSS). Cointegration was assessed using the Johansen and Engle–Granger methods. From 2005–2018, the highest mean beech roundwood prices were found for Austria (77.5 € m−3) and Germany, and the lowest for Poland and Slovakia. Roundwood prices were badly affected by the 2008/2009 financial crisis, which caused an approx. 27% decline. The prices of large-diameter beech logs exhibited seasonal fluctuations, typically reaching a maximum in Q1 and a minimum in Q3. The amplitude of those fluctuations was the highest in Slovenia in 2005 (10.1%), while in Czechia and Germany, seasonal effects increased over the period of study. The lowest seasonality was found in Slovakia and Austria (in the latter country it was not statistically significant). On an annual scale, cyclical changes generally accounted for the largest proportion of price variation, and were particularly pronounced in Poland (78.9%), Slovakia (78.6%), and Austria (69.2%). On the other hand, seasonal effects were predominant in the Slovenian (40.6%), German (34.1%), and Czech (33.3%) markets. In countries with price series of type I(0), simple correlation between stationary beech roundwood prices is positive and the strongest between Czechia–Poland and Czechia–Austria; on the other hand they are the weakest in the German market. In Slovakia and Slovenia with nonstationary price series, both Johansen’s and Engle-Granger’s cointegration tests indicated the absence of a long-term equilibrium between the analyzed beech timber markets. Results revealed integration between the prices of large-diameter beech logs in Czechia, Austria, and Poland. It should be mentioned that in this study, the time series of price used are rather short for long time cointegration analysis, which might prevent the proper detection of cointegration between all analyzed countries.

Multifractal Detrended Fluctuation Analysis (MF-DFA) of Stock Market Indexes. Empirical Evidence from Seven Central and Eastern European Markets

In this paper, we present a comparative investigation of the multifractal properties of seven Central and Eastern European (CEE) stock markets using recent financial data up to August 2018 by employing seasonal and trend decompositions before applying multifractal detrended fluctuation analysis. We find that stock indices returns exhibit long-range correlations, supporting the idea that the stock markets in question are not efficient markets and have not reached a mature stage of market development. The results of the paper are of interest to investors looking for opportunities in these stock exchanges and also to policy makers in their endeavour of realizing institutional reforms in order to increase stock market efficiency and to support the sustainable growth of the financial markets.

Univariate and Bivariate Volatility in Central European Stock Markets

This paper examines if the volatility exhibits a symmetric or an asymmetric response to past shocks, particularly the relevance of structural breaks for Central European (hereinafter referred to as CEE) stock markets. In addition, it is of great interest to see if the CEE emerging markets are correlated with other emerging ones, as well as to analyse the correlation with the developed markets, for optimizing investment portfolios. Using a CEE group approach (regional index) and daily data from 2002 to 2015, the results suggest that markets react differently to similar negative and positive returns, except for the rapid growth period, when the greed sentiment dominates the markets. Furthermore, the structural break dates affect volatility, the highest asymmetric coefficient being recorded for the pre-crisis period. For the bivariate approach, the emerging markets and developed markets indexes provided by the Morgan Stanley Capital International (hereinafter referred to as MSCI) have been considered and the results suggest that CEE stock markets are correlated with emerging stock markets rather than developed ones. For both pairs, the correlation is consistently higher for the break dates characterized by an increase in volatility, which is in line with the literature that claims that the co-movements increase when international factors dominate the national ones, and influence stock markets.

Short-term Shocks and Long-term Relationships of Interdependencies Among Central European Capital Markets

IntroductionGlobalisation phenomenon and changes in the main development determinants of industrialised countries lead to growing interdependencies among economies (Balcerzak, 2009, 2016a; Janda et al., 2013; Pohulak-Zolcdowska, 2016; Kondratiuk-Nierodzinska, 2016; Pietrzak and Balcerzak, 2016a; Balcerzak and Pietrzak, 2016a, 2017). That factor can be especially significant in the case of capital markets (Meluzin and Zinecker, 2016; Meluzin et al., 2016; Osinska et al., 2016). Last global financial crisis has proved the growing influence of financisation of economy on the situation on labour markets (Glazar and Strielkowski, RECENT ISSUES IN ECONOMIC DEVELOPMENT 2010; Muller-Frcczek and Pietrzak, 2011; Pietrzak and Balcerzak, 2016b), macroeconomic fiscal stability (Hadas-Dyduch, 2015; Miklaszewicz, 2016; Majerova, 2016; Lajtkepova, 2016; Balcerzak, 2016b; Balcerzak and Rogalska, 2016; Balcerzak et al., 2016) and sustainability of whole economies (Pietrzak et al., 2014; Pietrzak and Balcerzak, 2016c; Balcerzak and Pietrzak, 2016b). As a result, identification of international linkages among markets and analysis of their variability over time is the condition for effective management of risk associated to potential negative influence of global capital markets (Arshanapalli et al., 1995; Andersen et al., 1999; Baur, 2003; Pericoli and Sbracia, 2003; Engle, 2009; Billio and Caporin, 2010; Syllignakis and Kouretas, 2011; Baek and Jun, 2011; Karanasos et al., 2014; Reboredo et al., 2015; Heryan and Ziegelbauer, 2016; Gawronska-Nowak and Grabowski, 2016). It is of great importance both for policy makers at macroeconomic level and managers operating in international environment from microeconomic perspective. As a result, in spite of relatively big supply of research on this subject, the identification of linkages among markets, analysis of changes in the strength of these dependencies must be considered as an important field of scientific research (Forbes and Rigobon, 2002; Corsetti et al., 2005).The main aim of this article is to analyse interdependences among Austrian, Czech, Hungarian and Polish capital markets and the market of Germany. The analysis is carried out both in terms of the impact of short-term shocks and long-term path of these markets. Two hypotheses are proposed in the article. The first one states that there is a similar formation process of long term interdependencies among German and pointed Central European capital markets. According to the second hypothesis it is assumed that volatility of individual capital markets significantly affects the changes of strength of the interdependencies among analysed markets.The article is a continuation and further development of previous research efforts of the authors (Faldzinski and Pietrzak, 2015; Faldzinski et al., 2016; Zinecker et al., 2016; Balcerzak et al., 2016). In this article in order to measure relationships among markets conditional correlations calculated on the basis of the results of estimation of parameters of ARMA(p, q)-APARCH(1,1)-DCC model were used. To verify the hypotheses of the article cointegration analysis for the conditional correlations among selected markets on the basis of VECM model was performed. In the case of specification of VECM model authors have proposed a novel approach in the form of adding the conditional variances for the capital markets as an additional explanatory variable. The inclusion of the variances in the VECM model allowed to assess the impact of short-term shocks on the change of the strength of interdependencies among the analysed capital markets.1.Literature ReviewAs it has been already stated in the introduction, last global financial crisis with the problem of contagion effect was an important factor that has resulted in growing interests in potential consequences of interdependencies among financial markets. The research in that field usually takes a global perspective, where the econometric models are applied to analysis of wide set of international stock indices, or it has regional character from the perspective of world economy, where the main attention is given to interdependencies among markets from a group of countries with similar fundamental characteristics. …

The Other Month Effect: Some Evidence from the Central and Eastern European Markets

January returns on stock markets can be used as a barometer for the subsequent 11-month holding period returns as documented by Cooper et al. (2006). We examine this apparent anomaly and analyze the effects of other holding periods of 1, 3, and 6 months in six Central and Eastern European transition economies from January 1991 through December 2013. Our results do not support the presence of the other January effect (OJE) in five of the six markets. Instead, the results reveal significant anomalies in non-January months and that such effects vary across markets. This latter evidence might reflect different characteristics in these economies, including diverse levels of market efficiency, local risk factors, and portfolio management among others. Furthermore, we construct a trading rule using the other month effect to illustrate the possibility of developing profitable investment strategies to earn abnormal returns.

The Impact of Investor Sentiment on Stock Returns in Emerging Markets: The Case of Central European Markets

This article studies the effect of investor sentiment on stock returns in three Central European markets: the Czech Republic, Hungary, and Poland. The results show that sentiment is a key variable in the prices of stocks traded on these markets, and has a stronger impact here than in more developed European markets. This effect is linked to stock characteristics, particularly those considered to make stocks more prone to the influence of investor sentiment. The evidence shows that the effect is not uniform across countries, since higher levels are found for Poland and the Czech Republic, thus confirming the role of country-specific factors in the impact of investor sentiment on stock prices. The results also confirm that sentiment is a twofold (global and local) phenomenon, in which the global dimension has much greater impact than the local dimension, at least in the markets considered. Finally, the article shows that sentiment does not spread, at least to any significant degree, through the movement of capital between markets. This strengthens the argument that sentiment is transmitted through a behavioral mechanism. If this argument proves correct, there is little likelihood of local regulatory action being very effective in limiting the perverse impact of asset bubbles.

Challenges in the Central European Postal Markets: The Example of the Polish Post

The purpose of this work is to show the economic conditions of the postal market in Poland. The pace of economic transformation and growing competition in the postal market means that Polish Post is somehow forced to take new measures to improve the effectiveness of communication with their market environment. The focus points of this study are the economic mechanisms of the effectiveness and efficiency of the process of communicating specified value to the customer, and an attempt to identify the factors boosting an increase in efficiency. The reflections contained in the paper do not have definite characteristics and should be treated as an opinion in the discussion.

Global Shared Service Trends in the Central and Eastern European Markets

The main objective of the research is to disclose what kind of trends are present in the global business service markets and which appear in the Central and Eastern European (CEE) business market. The research determines the most important business service trends that emerged in shared service organizations in the CEE region.

The Dynamics of Central European Equity Market Integration

This paper examines bilateral and multilateral cointegration properties of the German stock market and those of the three major Central European countries which recently attained membership in the European Union. Cointegration tests cover the time period of July 6, 1995 to February 10, 2005. Additional techniques are also applied to provide further information concerning the dynamic evolution of the integration process during this period. Application of the Johansen (1988) cointegration procedure indicates that, contrary to results for an earlier time period there is evidence of an emerging long-term relationship between the German and UK markets and the Czech market, as well as cointegration within the group of Central European markets. We also apply the Haldane and Hall convergence analysis, in an effort to determine the extent to which these markets are converging to London or Frankfurt. Overall, the results suggest that the process of integration of the Central European countries into the EU is leading to a closer integration of their equity markets with those of major EU countries.

Stock Market Volatility Changes in Central Europe Caused by
 Asian and Russian Financial Crises

We consider four Central European stock market indexes over the period April 30, 1996 - August 31, 2001. We have found that the influence of the Asian crisis over the Central European markets is more severe than this of the Russian crisis. During the crises the Central European markets exhibit an increase in correlation and a decrease afterwards. We have found that the correlation never reaches pre-crisis level. We have found increasing persistence for Central European markets not only during the crisis but also during the postcrisis period. After the crisis, the market reaction is much weaker to the current market news than to the past information. Investigating the relationships between stock volatility and expected returns, we do not prove positive relation. During the crisis periods the relationship is positive and thus compensating risk-averse investors.

Random-Walk and Efficiency Tests of Central European Equity Markets

The existence of weak-form efficiency in the equity markets of the three main Central European transition economies (the Czech Republic, Hungary, and Poland) is examined for the period July 1995 through September 2000, using weekly Investable and Comprehensive indexes developed by the International Finance Corporation. Several different approaches are used. Univariate and multivariate tests provide some evidence that stock prices in these exchanges exhibit a random walk, which would support weak-form efficiency. This differs in some cases from studies using data for the initial years of these markets. The variance ratio test of Lo and MacKinlay (1988) yields somewhat mixed results concerning the random walk properties of the indexes. A model-comparison test compares forecasts from a NAIVE model with ARIMA and GARCH alternatives. Results from the model-comparison approach are consistent in rejecting the random-walk hypothesis for the three Central European equity markets.

Foreign Banks' Entry into Central and East European Markets: Motives and Activities

This article presents some theoretical issues of multinational banking and their application to the pattern of foreign banks' operations in three selected Central European countries: Poland, Hungary and the Czech Republic, using postal survey results and an OLS/logit model of entry determinants. Additionally, the effects of foreign banks' entry in these countries are discussed. A detailed review of foreign banks' activities is presented in the Appendix. Foreign banks appear to be one of the most important factors influencing the shape of banking sectors in the countries analysed. However, banks' profiles differ, depending on the individual host country's level of development and privatisation progress. Generally, their activities tend to focus mostly on corporate services, while the perceived need for support of the client base is the most important reason for expansion. Although the direct benefits from entry are limited, indirect ones are quite evident, especially in the areas of corporate finance and foreign trade services.

The Extent of Efficiency in Central European Equity Markets

This paper investigates the possibility that the newly emerging equity markets in Central Europe exhibit a degree of efficiency similar to that which prevails in more developed markets. The different privatization strategies adopted by the various countries in the region are shown to have created equity markets of vastly different sizes, with the largest market, that in the Czech Republic, being similar in coverage to many in Western Europe. Disclosure requirements appear to be sufficient for efficiency although there are differences across countries in whether these requirements are based in law or depend on voluntary action, as well as the extent to which they are enforced. Both distribution based and distribution-free tests do not reject the hypothesis that equity market returns are random walks in the four Visegrad countries. This finding is consistent with these markets being weak-form efficient. The paper concludes with a discussion of ways in which other forms of efficiency could be tested for these markets.