Implications of market frictions: serial correlations in indexes on the emerging stock markets in Central and Eastern Europe

• Authors: Joanna OLBRYŚ , Elżbieta MAJEWSKA
• Languages of publication: EN

Abstracts

EN

Implications of market frictions in the context of serial correlations in indexes on the Central and Eastern European (CEE) stock markets have been analysed. Market frictions, such as non-trading effects, bid/ask spreads, other transaction costs, etc., may be detected by direct measurement, or by indirect identification. Direct measurement of frictions is difficult as intraday trading data are unavailable in the case of most of the emerging CEE stock markets. Indirect identification may be conducted by detecting some empirical phenomena. One of them is evidence of serial correlations in indexes, the so-called the Fisher effect. We explore the problem of serial correlations in indexes on the eight CEE stock markets using data samples from each CEE market separately, as well as a “common trading window” approach, which is widely applied in the case of databases with multivariate time series. The evidence is that nonsynchronous trading effect II between markets may substantially disrupt the analysis of index returns on a domestic market. Using a synchronized database, one may erroneously conclude that the Fisher effect does not exist, although it is present.

Keywords

EN

CEE stock markets; market frictions; nonsynchronous trading; index serial correlation; market efficiency

• Publisher: Politechnika Wrocławska. Oficyna Wydawnicza Politechniki Wrocławskiej
• Journal: Operations Research and Decisions
• Year: 2014
• Volume: 24
• Issue: 1
• Pages: 51-70

Contributors

author

Joanna OLBRYŚ

• Bialystok University of Technology, ul. Wiejska 45A, 15-351 Białystok, Poland, corresponding author

author

Elżbieta MAJEWSKA

• Bialystok University, ul. M. Skłodowskiej-Curie 14, 15-097 Białystok, Poland

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Identifiers

DOI

10.5277/ord140104