Title: Crisis periods and contagion effects in the CEE stock markets: the influence of the 2007 US subprime crisis

Authors: Joanna Olbrys; Elzbieta Majewska

Addresses: Faculty of Computer Science, Bialystok University of Technology, Wiejska 45A, 15–351 Bialystok, Poland ' Faculty of Mathematics and Informatics, University of Bialystok, K. Ciolkowskiego 1M, 15-245 Bialystok, Poland

Abstract: The main goal of this paper is a direct identification of crisis periods in the eight Central and Eastern European (CEE) equity markets, and, for comparison, in the US market. A statistical procedure of dividing market states into up and down markets is employed. The results confirm October 2007-February 2009 as the common period of the recent global financial crisis in the CEE markets, except for Slovakia. Moreover, the effect of increasing cross-market correlations in the crisis period in the context of contagion is investigated, applying both standard contemporaneous correlations and volatility-adjusted correlation coefficients. A research hypothesis that there was no contagion effect among the US and the CEE stock markets during the 2007-2009 crisis is explicitly tested. The robustness analysis of contagion tests based on monthly, weekly and daily data is provided. The results reveal that the utilised tests are rather less sensitive with respect to the choice of data frequency.

Keywords: CEE stock markets; financial crisis; market states; cross-market correlations; crisis periods; contagion effects; US subprime crisis; Central and Eastern Europe.

DOI: 10.1504/IJCEE.2016.075612

International Journal of Computational Economics and Econometrics, 2016 Vol.6 No.2, pp.124 - 137

Received: 13 Dec 2014
Accepted: 24 Mar 2015
Published online: 30 Mar 2016 *

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