Elżbieta Majewska

Direct Identification of Crisis Periods on the CEE Stock Markets: The Influence of the 2007 U.S. Subprime Crisis

The main goal of this paper is a direct identification of crisis periods on the eight Central and Eastern European (CEE) stock markets, and, for comparison, on the U.S. market. We employ a statistical procedure of dividing market states into up and down markets. Our aim is to examine whether crisis periods are common in various countries, and the results confirm Oct 2007 – Feb 2009 as the common period of the recent global financial crisis, except for Slovakia. Moreover, we investigate the effect of increasing cross–market correlations in the crisis period in the context of contagion, applying both standard contemporaneous correlations and volatility-adjusted correlation coefficients. Our results confirm that accommodating heteroskedasticity is crucial for detecting contagion across stock markets. The data consists of monthly logarithmic returns of the major CEE and the U.S. stock market indexes, in the period May 2004 – April 2013.

Testing Integration Effects Between the Cee and U.S. Stock Markets During the 2007–2009 Global Financial Crisis

Abstract The main goal of this paper is to explicitly test a research hypothesis that there was no integration effect among the U.S. and the eight Central and Eastern European (CEE) stock markets during the 2007-2009 Global Financial Crisis (GFC). As growing international integration could lead to a progressive increase in cross-market correlations, the evaluation of integration was carried out by applying equality tests of correlation matrices computed over non-overlapping subsamples: the pre-crisis and crisis periods, in the group of investigated markets. The crisis periods are formally established based on a statistical method of dividing market states into bullish and bearish markets. The sample period May 2004-April 2014 includes the 2007 U.S. subprime financial crisis. The robustness analysis of the integration tests with respect to various data frequencies is provided. The empirical results are not homogeneous and they depend both on the integration test and data frequency. Consequently, it is not possible to conclude whether integration between the investigated markets is present.

Asymmetry Effects in Volatility on the Major European Stock Markets: the EGARCH Based Approach

The main goal of this paper is to investigate the asymmetric impact of innovations on volatility in the case of the largest European stock markets in the United Kingdom, France and Germany by using the EGARCH based approach. The sample period begins in January 2003 and ends in December 2016, and it includes the 2007 U.S. subprime crisis. The robustness analysis of empirical results is provided with respect to the whole sample and three adjacent subsamples, each of equal size: 1) the pre-crisis, 2) the Global Financial Crisis (GFC) and 3) the post-crisis periods. The GFC periods are formally detected by using a statistical method of dividing market states into bullish and bearish markets. Moreover, the common trading window procedure is employed to avoid the nonsynchronous trading problem in the group of investigated markets and to get the overlapping information set. We estimate univariate EGARCH models based on daily percentage logarithmic returns of major stock market indexes: FTSE100 (London), CAC40 (Paris), and DAX (Frankfurt). Pronounced negative asymmetry effects in volatility are presented in the case of all markets and are rather robust to the choice of the period. Our findings are consistent with the literature and suggest that the major European stock markets are more sensitive to ’bad’ than ‘good’ news.

Formal Identification of Crises on the Euro Area Stock Markets, 2004–2015

In this paper, crisis periods on the 19 euro area stock markets are formally detected and explored. A statistical method of dividing market states into bullish and bearish markets based on monthly logarithmic returns of major stock market indexes is employed. The sample period begins on January 2004, ends on December 2015, and includes the 2007–2009 Global Financial Crisis (GFC) and the subsequent euro area crises. Moreover, correctness of formal identification of down market periods is discussed utilizing two methods for verifying the bear market conditions. The empirical results indicate February 2009 as the end of the GFC for almost all countries investigated, except for Slovenia, Lithuania, Malta, Estonia, and Latvia, for which March 2009 is obtained as the end of the GFC. Furthermore, the findings concerning the European crises during the period beginning from late 2009 are in accord with the existing literature.

Measuring Dynamics of Financial Integration on the Euro Area Stock Markets, 2000–2016

The goal of this paper is to measure the dynamics of financial integration between the euro area stock markets over the long time period 2000–2016. The panel of data consists of monthly logarithmic returns of 19 major euro area stock market indexes. The evolution of the integration process is analyzed using a dynamic principal component approach. The index of integration, which measures the proportion of total variation in individual stock index logarithmic returns explained by the first principal component, serves as a measure of integration. The empirical results reveal that the dynamics of integration across the whole group of markets increased significantly after January 2008, during the global financial crisis (GFC). An inverted U-shaped pattern in the index of integration has been found in this period. The GFC and the subsequent euro area crises were formally detected based on the statistical procedure for an identification of down markets. Moreover, the estimation results of the index of integration turn out to be robust to the choice of a rolling window length.

The Evolution of Financial Integration on Selected European Stock Markets: a Dynamic Principal Component Approach

Abstract The goal of this paper is to recognize the dynamics of financial integration across the European stock markets over the last two decades. We investigate two groups of markets: (1) three developed European markets in the U.K., France, and Germany; and (2) three emerging Central and Eastern European markets in Poland, the Czech Republic, and Hungary (CEE-3). The evolution of the integration process is analyzed using a dynamic principal component approach. The index of integration serves as a robust measure of integration. The empirical results reveal that the dynamics of integration across the whole group of markets increased significantly following the CEEC-3’s accession to the European Union. An inverted U‑shape in the index of integration has been found in this case. Moreover, the average index of integration was significantly different during the Global Financial Crisis compared to the pre‑crisis period.

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

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.

ON THE SECOND BOUNDARY-VALUE PROBLEM FOR THE AIRY EQUATION

In [3] there has been examined the equation Dtu = mD^u which is called the Airy equation and is a linear version of the Korteweg-de Vries (KdV) equation. It arises in the description of the slow variation of a wave front in coordinates moving with the wave. It also describes the propagation of oscillatory wave packets. In [5], [6] it is proved that equation Dtu = D^u is one of the canonical forms of third order partial differential equations and it is called the equation with characteristics multiple (see [4], p. 132). The first boundary value problem (or also called the Cattabriga problem) for Airy equation has been examined in [2], [4]; moreover, in [3] the Cauchy problem for this equation has been considered. Papers [9], [10] were devoted to solve contact problems for the said equation. This paper concerns the second boundary-value problem for equation (1) in the domain D = {(jc, i) G K : 0 < X < 1, 0 < t < T}, T = const. > 0.