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VOLATILITY SPILLOVERS BETWEEN EASTERN EUROPEAN AND EURO ZONE STOCK MARKETS
Viorica Chirila, Ciprian-Ionel Turturean, Ciprian Chirila

ABSTRACT. The paper presents the results obtained after the investigation of volatility spillovers between the Eastern European stock markets (Romania, Hungary, the Czech Republic, Bulgaria and Poland) and the Euro Zone stock market. The estimation of a model with 6 GARCH-BEKK variables allows the identification of useful results on the interaction of volatilities of the stock markets under analysis. The volatility of the Euro zone stock market is transmitted towards the East European stock markets but to a very small extent. The volatilities of the East European stock markets are not transmitted to the Euro zone. The results as well show that there are bi-directional volatility linkages between the East European stock markets. The volatilities of the East European stock markets are more determined by the shocks that occur on their own markets than the shocks from the Euro zone market. Based on all these results, it can be ascertained that the East European stock markets represent an alternative for the performance of international diversification of portfolios .

KEYWORDS: return, risk, stock market, multivariate heteroscedastic models, volatility spillovers.

JEL classification: G15, C58, G11, C51.