Comovements of Stock Markets in the CEE-3 Countries During the Global Financial Crisis

This paper examines the comovements of stock markets in the CEE-3 (Central and Eastern European: Poland, the Czech Republic, and Hungary) countries using the VAR-GARCH-BEKK model over the period 2005-13. Research indicates that in the CEE-3 countries, volatility spillovers played a dominant role and that the stock exchanges in Poland, the Czech Republic, and Hungary did not react similarly to the global shocks of the recent crisis (2007-2013). We use a dynamic version of the Diebold-Yilmaz volatility spillover index to present the evolution of volatility transmission over time. The results show that the CEE-3 countries were volatility-takers in the period under analysis and that volatility spillovers were extremely high during periods characterized by market uncertainty.