<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The main goal of this paper is to investigate the behaviour of stock returns in the case of stock markets from Central and Eastern Europe (CEE), focusing on the relationship between returns and conditional volatility. Since there is relatively little empirical research on the volatility of stock returns in underdeveloped stock markets, with even fewer studies on markets in the transitional economies of the CEE region, this paper is designed to shed some light on the econometric modelling of the conditional mean and volatility of stock returns from this region. The results presented in this paper provide confirmatory evidence that ARIMA and GARCH processes provide parsimonious approximations of mean and volatility dynamics in the case of the selected stock markets. There is overwhelming evidence corroborating the existence of a leverage effect, meaning that negative shocks increase volatility more than positive shocks do. Since financial decisions are generally based upon the trade-off between risk and return, the results presented in this paper will provide valuable information in decision making for those who are planning to invest in stock markets from the CEE region.</p></abstract>

The main goal of this paper is to investigate the behaviour of stock returns in the case of stock markets from Central and Eastern Europe (CEE), focusing on the relationship between returns and conditional volatility. Since there is relatively little empirical research on the volatility of stock returns in underdeveloped stock markets, with even fewer studies on markets in the transitional economies of the CEE region, this paper is designed to shed some light on the econometric modelling of the conditional mean and volatility of stock returns from this region. The results presented in this paper provide confirmatory evidence that ARIMA and GARCH processes provide parsimonious approximations of mean and volatility dynamics in the case of the selected stock markets. There is overwhelming evidence corroborating the existence of a leverage effect, meaning that negative shocks increase volatility more than positive shocks do. Since financial decisions are generally based upon the trade-off between risk and return, the results presented in this paper will provide valuable information in decision making for those who are planning to invest in stock markets from the CEE region.

An Empirical Analysis Of Stock Returns And Volatility: The Case Of Stock Markets From Central And Eastern Europe

Jasmina Okičić, PhD, Assistant Professor, University of Tuzla, Faculty of Economics

South East European Journal of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The main goal of this paper is to investigate the behaviour of stock returns in the case of stock markets from Central and Eastern Europe (CEE), focusing on...

An Empirical Analysis Of Stock Returns And Volatility: The Case Of Stock Markets From Central And Eastern Europe

Data publikacji: 11 mar 2015

Zakres stron: 7 - 15

DOI: https://doi.org/10.2478/jeb-2014-0005

Słowa kluczowe
stock returns, volatility, CEE region

© South East European Journal of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

An Empirical Analysis Of Stock Returns And Volatility: The Case Of Stock Markets From Central And Eastern Europe

Data publikacji: 11 mar 2015

Zakres stron: 7 - 15

DOI: https://doi.org/10.2478/jeb-2014-0005

Słowa kluczowestock returns, volatility, CEE region

© South East European Journal of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Słowa kluczowe
stock returns, volatility, CEE region