Does simultaneous investing on different stock markets allow to diversify risk? The cointegration analysis with main focus on Warsaw Stock Exchange

• Authors: Anna Misiuk , Olga Zajkowska
• Languages of publication: EN

Abstracts

EN

This paper aims at examining the bilateral linkage between daily stock market indices, in which the leading index of WSE (WIG20) is the reference. Thus, the study is limited to pairs including WIG20 and indices which are listed on the financial centers of WSE’s main foreign investors. The relationship between the markets is investigated throughout the cointegration theory. Further, the Granger causality is carried out in order to distinguish the directions of influence across the stock market environments. The obtained results shall explain the investor’s tendencies in portfolio diversification.

Keywords

EN

market stock exchange; stock exchange indices; WIG20; cointegration theory; Granger causality; portfolio diversification

• Publisher: Katedra Ekonometrii i Statystyki, Szkoła Główna Gospodarstwa Wiejskiego w Warszawie
• Journal: Metody Ilościowe w Badaniach Ekonomicznych
• Year: 2010
• Volume: 11
• Issue: 1
• Pages: 118-127

Dates

published

2010

Contributors

author

Anna Misiuk

• Department of Econometrics and Statistics Warsaw University of Life Sciences

author

Olga Zajkowska

• Department of Econometrics and Statistics Warsaw University of Life Sciences

References

• Banerjee A., Dolado J., Mestre R. (1998) Error correction mechanism tests for cointegration in a single equation framework, Journal of Time Series Analysis, 19(3), 267-283.
• Dickey D., Fuller W. (1979) Distribution of the Estimators for Autoregressive Time Series with a Unit Root, Journal of the American Statistical Association, 74, 427-431.
• Dickey D., Fuller W. (1981) Likelihood Ratio Tests for Autoregressive Time Series with a Unit Root, Econometrica, 49, 1057-1072.
• Gilmore C. G. McManus G. M. (2002) International Portfolio Diversification: US and Central European Equity Markets, Emerging Markets Review, 3, 69–83.
• Gilmore G. C, Lucey M. B, MacManus M. G. (2005) The dynamics of Central European Equity Market Integration, IIIS Discussion Paper, 69.
• Granger C.W.J. (1969) Investigating causal relations by econometric model, Econometrica, 37, 424-438.
• Grubel H.G. (1968) Internationally Diversified Portfolios: Welfare Gains and Capital Flows, American Economic Review 58, 1299-1314.
• Grubel H.G. Kenneth F. (1971) The Interdependence of International Equity Markets, Journal of Finance 26 (1), 89-94.
• Lessard D.R. (1973)International Portfolio Diversification:A Multivariate Analysis for a Group of Latin American Countries, Journal of Finance 28 (3), 619-633.
• Levy H. Sarnat M. (1970) International Diversification of Investment Portfolios, The American Economic Review 60 (4), 668-675.
• Kanas A. (1998) Linkages between the US and European equity markets: further evidence from cointegration tests, Applied Financial Economics 8 (6),607 – 614.
• Markowitz H.M. (1952) Portfolio Selection The Journal of Finance 7 (1), 77–91.
• Markowitz H.M. (1959) Portfolio Selection: Efficient Diversification of Investments, John Wiley & Sons New York.
• Solnik B.H. (1974) Why Not Diversify Internationally Rather Than Domestically?, Financial Analysts Journal 30, 48-54.
• Rousova L. (2009) Are the Central European Stock Markets Still Different? A Cointegration Analysis, Economics 15, University of Munich, Dep. of Economics.
• Voronkova S. (2004) Equity Market Integration in Central European Emerging Markets: A Cointegration Analysis with Shifting Regimes, International Review of Financial Analysis, Vol.13, 633– 647.