Michał Bernard Pietrzak,

Nicolaus Copernicus University, Toruń, Poland,

michal.pietrzak@umk.pl

SHORT-TERM SHOCKS AND LONG- TERM RELATIONSHIPS

OF INTERDEPENDENCIES AMONG CENTRAL EUROPEAN CAPITAL MARKETS

 Marcin Fałdziński,

Nicolaus Copernicus University, Toruń, Poland,

marf@umk.pl

Adam P. Balcerzak,

Nicolaus Copernicus University, Toruń, Poland,

adam.balcerzak@umk.pl

Tomáš Meluzín,

Brno University of Technology, Brno, Czech Republic,

meluzint@vutbr.cz

Marek Zinecker,

Brno University of Technology, Brno, Czech Republic,

zinecker@fbm.vutbr.cz

Abstract. The article focuses on the problem of interdependences among Central European  capital markets. The main aim of this research is to identify long- term interdependences among Austrian, Czech, Hungarian and Polish capital markets and the market of Germany. Additionally, the impact of short-term shocks on these markets is under evaluation. In the first step of the research the interdependencies among the capital markets in the years 1997-2015 were verified. For this purpose the DCC-GARCH model with the conditional t-distribution was used. In the second step, an analysis of cointegration for the interdependencies among the markets was carried out. The authors proposed to include conditional variances of the analysed markets as additional explanatory variables in the cointegration analysis. As the conditional variance most often reflects the impact of short-term shocks, the proposed approach allowed to take into account short- term market shocks in the cointegration analysis. The results enabled to identify long-term path for the course of the interdependences among markets of Germany, Austria, Czech Republic, Hungary and Poland. The mentioned Central European capital markets make a group of markets characterized with similar long-term path, which are focused around the dominant market of Germany.

Received: July, 2016

1st Revision: November, 2016

Accepted: December, 2016

DOI: 10.14254/2071- 789X.2017/10-1/5

JEL Classification: G15, C58

Keywords: cointegration     analysis,          DCC-GARCH            model, conditional variance, conditional correlation, short-term shocks.