Asymmetric Information Transmission between a Transition Economy and the U.S. Market: Evidence from the Warsaw Stock Exchange

Abstract We investigate the international information transmission between the U.S. and Polish stock markets using daily return data from the S&P 500 Index and the Warszawski Indeks Gieldowy (WIG). The results show no volatility spillover between these two markets and that these two markets are not driven by a long-run common trend. However, there is a mean spillover running from the U.S. to the Warsaw Stock Exchange (WSE) in the EGARCH model. There is weak evidence of short-run influence of the U.S. market on the performance of the WSE. By contrast, the WSE has virtually no influence on the U.S. market.

[1]  S. Johansen.  STATISTICAL ANALYSIS OF COINTEGRATION VECTORS , 1988 .

[2]  G. Andrew Karolyi,et al.  Good news, bad news and international spillovers of stock return volatility between Japan and the U.S. , 1994 .

[3]  G. Box,et al.  On a measure of lack of fit in time series models , 1978 .

[4]  G. Geoffrey Booth,et al.  Asymmetric volatility transmission in international stock markets , 1995 .

[5]  J. Sachs.  The Transition at Mid Decade , 1996 .

[6]  P. Phillips.  Testing for a Unit Root in Time Series Regression , 1988 .

[7]  W. Charemza,et al.  Regulation of the Warsaw Stock Exchange: The portfolio allocation problem , 2000 .

[8]  Time-Varying World Market Integration , 1994 .

[9]  Robert F. Engle,et al.  Testing for Common Features , 1993 .

[10]  W. Newey,et al.  A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelationconsistent Covariance Matrix , 1986 .

[11]  S. Johansen.  Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models , 1991 .

[12]  Campbell R. Harvey,et al.  PREDICTABLE RISK AND RETURNS IN EMERGING MARKETS , 1999 .

[13]  Robert F. Engle,et al.  Hourly volatility spillovers between international equity markets , 1994 .

[14]  T. Bollerslev,et al.  Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model , 1990 .

[15]  W. Fuller,et al.  Distribution of the Estimators for Autoregressive Time Series with a Unit Root , 1979 .

[16]  Teppo Martikainen,et al.  Price and volatility spillovers in Scandinavian stock markets , 1997 .

[17]  W. Fuller,et al.  LIKELIHOOD RATIO STATISTICS FOR AUTOREGRESSIVE TIME SERIES WITH A UNIT ROOT , 1981 .

[18]  Michael Osterwald-Lenum.  A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics , 1992 .

[19]  T. Bollerslev,et al.  Generalized autoregressive conditional heteroskedasticity , 1986 .

[20]  Robert F. Engle,et al.  Testing for Common Features: Reply , 1993 .

[21]  Merton H. Miller,et al.  Mean Reversion of Standard & Poor's 500 Index Basis Changes: Arbitrage‐induced or Statistical Illusion? , 1994 .

[22]  Chris Chatfield,et al.  Introduction to Statistical Time Series. , 1976 .

[23]  T. Bollerslev,et al.  A CONDITIONALLY HETEROSKEDASTIC TIME SERIES MODEL FOR SPECULATIVE PRICES AND RATES OF RETURN , 1987 .

[24]  Daniel B. Nelson.  CONDITIONAL HETEROSKEDASTICITY IN ASSET RETURNS: A NEW APPROACH , 1991 .

[25]  W. Newey,et al.  A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelationconsistent Covariance Matrix , 1986 .