Work detail

Analysis of Interdependencies among Central European Stock Markets

Author: Mgr. Jana Mašková
Year: 2011 - summer
Leaders: doc. PhDr. Jozef Baruník Ph.D.
Work type: Finance, Financial Markets and Banking
Language: English
Pages: 82
Awards and prizes: M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance and for an extraordinarily good masters diploma thesis.
Abstract: The objective of the thesis is to examine interdependencies among the stock
markets of the Czech Republic, Hungary, Poland and Germany in the period 2008-2010.
Two main methods are applied in the analysis. The first method is based on the use of
high-frequency data and consists in the computation of realized correlations, which are
then modeled using the heterogeneous autoregressive (HAR) model. In addition, we
employ realized bipower correlations, which should be robust to the presence of jumps
in prices. The second method involves modeling of correlations by means of the
Dynamic Conditional Correlation GARCH (DCC-GARCH) model, which is applied to
daily data. The results indicate that when high-frequency data are used, the correlations
are biased towards zero (the so-called “Epps effect”). We also find quite significant
differences between the dynamics of the correlations from the DCC-GARCH models
and those of the realized correlations. Finally, we show that accuracy of the forecasts of
correlations can be improved by combining results obtained from different models
(HAR models for realized correlations, HAR models for realized bipower correlations,
DCC-GARCH models).
Downloadable: Diploma Thesis of Mašková Jana


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