ESTIMATION OF CORRELATION BETWEEN CAPITAL MARKETS. ANALYSING THE IMPACT OF CRISES ON THE CENTRAL AND EASTERN EUROPEAN MARKETS
ESTIMATION OF CORRELATION BETWEEN CAPITAL MARKETS. ANALYSING THE IMPACT OF CRISES ON THE CENTRAL AND EASTERN EUROPEAN MARKETS

Summary/Abstract: This paper analyses the behaviour of the existing correlations between Central and Eastern Europe’s markets, namely Romania, Czechia, Hungary, Poland, Slovenia, Slovakia and Bulgaria and the developed ones in Germany, France and United Kingdom. The study brings a new perspective on the subject by capturing two major stress periods in the Global Financial Crisis and the first wave of the COVID-19 pandemic. By estimating a BEKK model, as well as Spearman’s rank correlation coefficient and the Diebold and Yilmaz Spillover Index, the study finds strong similarities between the analysed markets, with a general decreasing trend of the correlations’ level, indicating increasing benefits of diversification.

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