CONTRIBUTORS OF MEAN AND VOLATILITY SHOCKS IN EAST EUROPEAN MARKETS

Abstract

The study aims to explore the mean and volatility spillover from leading European market to the East European markets after the disintegration of Russia. The study also provides insight regarding shift in influence from old allies to new partners. The ARMA-GARCH -M model is used to analyze the connection between leading markets (UK, Germany, France, and Russia) and East European markets (Slovenia, Estonia, Lithuania, Czech Republic, Serbia, Ukraine, Croatia, Romania, Hungry and Poland). The findings of the study provide evidence about existence of significant mean and volatility spillover from leading European markets to Eastern Europe markets. Information transmission is more pronounced in Western European countries, e.g. UK, Germany, and France as compared to Russia. However, remnants of Russian influence in East European markets can still be traced.