Asymmetric Return and Volatility Transmission in Euro Zone and Baltic Countries Stock Markets

Abstract

This paper analyzes the transmission of return and volatility from different stock markets. The stock markets that are analysed in the paper are from Lithuania, Estonia, Latvia and Euro zone. The indices that quantify the evolution of this stock markets are EURO STOXX 50, OMX Tallinn, OMX Vilnius and OMX Riga. These indices are used for determinations of return and risk in the case of this stock’s markets. Multivariate asymmetric heteroscedastic BEKK model was applied for estimate the transmission of return and volatility between the markets. The results of the empirical study confirm the existence of spillovers phenomenon: first, the spillover return from the Euro Zone stock market to the Baltic stock markets, second, the spillover volatility from the Euro Zone to Estonia and Lithuania stock market and third, the asymmetry of volatility transmission only between markets from Lithuania and Estonia.

Keywords

• bekk model
• baltic stock markets
• asymmetric spillovers