Master Theses

Monday, 20 September, 2021

Shcherbov Arsenii “Financial Connectedness of Eastern European Stock Market.”

Master Thesis Chair:
Stanislav Anatolyev

Abstract:

 The connectedness of financial assets and markets represents an essential concept that has long-lasting consequences for the assessment of risk. Thus, it is important to correctly measure dependencies and describe their dynamics to predict future responses of markets to shocks. In this thesis, I focus on the connectedness of Eastern European stock markets and assess the relationships between returns and volatilities in these markets, accounting for the presence of cryptocurrency markets and other major developed markets. I describe conditional correlations of returns from the DCC model of Engle (2002, JBES). Using the spillover framework proposed by Diebold and Yılmaz (2009, EJ) I measure the connectedness from a static and dynamic perspective. The results indicate that Eastern European markets are tightly connected. The measures of connectedness were fluctuating over time and have risen significantly as a consequence of the recent pandemic. The magnitude of the increase for different groups of markets ranges from 35% to 100%.