What guides Central and Eastern European stock markets? A view from detrended methodologies

The geopolitical and economic landscape of Central and Eastern European (CEE) countries has changed dramatically since the 1990s. The fragmentation of some countries and the change from communist regimes to capitalist ones transformed those countries. In this context, we propose to study 16 CEE stock markets, in relation to China, Germany, Russia and the UK, using the correlation coefficient of DCCA and DMCA. The results show that most stock markets (about 60%) are more related to the Russian one than to other European markets, even in the case of European Union members. The Bosnian, Slovakian and Latvian stock markets show evidence of segmentation, which could be interesting for portfolio managers, in terms of diversification.