CO-MOVEMENT OF FINANCIAL MARKETS IN EMERGING AND DEVELOPED ECONOMIES

This paper investigates the nature and interactions between Serbian equity market and selected regional and developed equity markets. Using the most recent data for the appropriate stock market indices spanning the period 2005-2009, market interdependencies are gauged by running cross-correlation and Granger causality tests. The results show statistically significant correlations between Serbian and German equity markets as well as Slovenian and Croatian equity markets. The highest correlation is documented between equity returns in Serbia and Germany. In addition, evidence on bidirectional causality is found for Serbian, Croatian and Slovenian markets. Also the paper finds unidirectional causality from Hungarian and German markets to Serbian market.