Interdependence of Emerging Eastern European stock markets

One of the main developments in the global economy during the past decades has been the growth of emerging economies. Projections for their long-term growth, changes in the investment climate, corporate transparency and demography point to an increasing role for these emerging economies in the global economy. Today, emerging economies are usually considered as financial markets offering opportunities for high returns, good risk diversification and improved return-to-risk ratios. However, researchers have noted that these advantages may be in decline because of the increasing market integration. Nevertheless, it is likely that certain financial markets and specific sectors will remain partially segmented and somewhat insulated from the global economy for the year to come. This doctoral dissertation investigates several stock markets in Emerging Eastern Europe (EEE), including the ones in Russia, Poland, Hungary, the Czech Republic, Bulgaria and Slovenia. The objective is to analyze the returns and financial risks in these emerging markets from international investor’s point of view. This study also examines the segmentation/integration of these financial markets and the possibilities to diversify and hedge financial risk. The dissertation is divided into two parts. The first includes a review of the theoretical background for the articles and a review of the literature on EEE stock markets. It includes an overview of the methodology and research design applied in the analysis and a summary of articles from the second part of this dissertation and their main findings. The second part consists of four research publications. This work contributes to studies on emerging stock markets in four ways. First, it adds to the body of research on the pricing of risk, providing new empirical evidence about partial stock market segmentation in EEE. The results suggest that the aggregate emerging market risk is a relevant driver for stock market returns and that this market risk can be used to price financial instruments and forecast their performance. Second, it contributes to the empirical research on the integration of stock markets, asset prices and exchange rates by identifying the relationships between these markets through volatility and asset pricing. The results show that certain sectors of stock markets in EEE are not as integrated as others. For example, the Polish consumer goods sector, the Hungarian telecommunications sector, and the Czech financial sector are somewhat isolated from their counterparts elsewhere in Europe. Nevertheless, an analysis of the impact of EU accession in 2004 on stock markets suggests that most of the EEE markets are becoming increasingly integrated with the global markets. Third, this thesis complements the scientific literature in the field of shock and volatility spillovers by examining the mechanism of spillover distribution among the EU and EEE countries. The results illustrate that spillovers in emerging markets are mostly from a foreign exchange to the stock markets. Moreover, the results show that the effects of external shocks on stock markets have increased after the enlargement of the EU in 2004. Finally, this study is unique because it analyzes the effects of foreign macroeconomic news on geographically closely related countries. The results suggest that the effects of macroeconomic announcements on volatility are significant and have effect that varies across markets and their sectors. Moreover, the results show that the foreign macroeconomic news releases, somewhat surprisingly, have a greater effect on the EEE markets than the local macroeconomic news. This dissertation has a number of implications for the industry and for practitioners. It analyses financial risk associated with investing in Emerging Eastern Europe. Investors may use this information to construct and optimize investment portfolios. Moreover, this dissertation provides insights for investors and portfolio managers considering asset allocation to protect value or obtain higher returns. The results have also implications for asset pricing and portfolio selection in light of macroeconomic news releases.

Return and volatility linkages between the S&P 500 and emerging stock markets in Eastern Europe

The aim of this thesis is to research mean return spillovers as well as volatility spillovers from the S&P 500 stock index in the USA to selected stock markets in the emerging economies in Eastern Europe between 2002 and 2014. The sample period has been divided into smaller subsamples, which enables taking different market conditions as well as the unification of the World’s capital markets during the financial crisis into account. Bivariate VAR(1) models are used to analyze the mean return spillovers while the volatility linkages are analyzed through the use of bivariate BEKK-GARCH(1,1) models. The results show both constant volatility pooling within the S&P 500 as well as some statistically significant spillovers of both return and volatility from the S&P 500 to the Eastern European emerging stock markets. Moreover, some of the results indicate that the volatility spillovers have increased as time has passed, indicating unification of global stock markets.

Irrelevant or transformative power? The OECD DAC and foreign aid policies in Central and Eastern Europe

The paper examines the impact of the OECD’s Development Assistance Committee (DAC) on the emerging foreign aid policies of the Central and Eastern European (CEEs) countries. The Czech Republic, Poland, Slovakia and Slovenia joined the DAC in 2013, and the committee has aimed to socialise them into the norms of the international development system. Generally, however, there is little evidence of impact due to the soft nature of the DAC’s policy recommendations, and the fact that the committee, reacting to the challenges to its legitimacy from non-Western donors, has become much less demanding towards potential members than in the past. The paper, however, argues that one must examine the processes of how the norm and policy recommendations of the DAC are mediated domestically. The case of the Czechepublic’s reforms in its foreign aid policy between 2007 and 2010 shows that domestic actors can use the OECD strategically to build support for their own cause and thus achieve seemingly difficult policy reform.

Life (dis)satisfaction and the decision to migrate: Evidence from Central and Eastern Europe

This paper provides empirical evidence of the impact of life satisfaction on the individual intention to migrate. The impacts of individual characteristics and of country macroeconomic variables on the intention to migrate are analyzed jointly. Differently from other studies, we allow for life satisfaction to serve as a mediator between macroeconomic variables and the intention to migrate. Using the Eurobarometer Survey for 27 Central Eastern European (CEE) and Western European (non-CEE) countries, we find that people have a higher intention to migrate when dissatisfied with life. The socio-economic variables and macroeconomic conditions have an effect on the intention to migrate indirectly through life satisfaction. The impact of life satisfaction on the intention to migrate for middle-aged individuals with past experience of migration, low level of education, and with a low or average income from urban areas is higher in CEE countries than in non-CEE countries.

The Western Imaginary and the Imagined Strategies against it in the New European Countries and the Margins of Eastern Europe (Working paper) 

სტატია მომზადდა ევროაკადემიის საერთაშორისო კონფერენციისთვის „აღმოსავლეთ ევროპის ხელახლა გამოგონება"

Progress Towards to Equity Market Integration in Eastern Europe

The advent of the European Union has decreased the diversification benefits available from country based equity market indices in the region. This paper measures the increase in stock integration between the three largest new EU members (Hungary, the Czech Republic and Poland who joined in May 2004) and the Euro-zone. A potentially gradual transition in correlations is accommodated in a single VAR model by embedding smooth transition conditional correlation models with fat tails, spillovers, volatility clustering, and asymmetric volatility effects. At the country market index level all three Eastern European markets show a considerable increase in correlations in 2006. At the industry level the dates and transition periods for the correlations differ, and the correlations are lower although also increasing. The results show that sectoral indices in Eastern European markets may provide larger diversification opportunities than the aggregate market. JEL classifications: C32; C51; F36; G15 Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Return Comovement; Sectoral correlations; New EU Members

The oral cancer epidemic in central and eastern Europe.

To monitor recent trends in oral and pharyngeal cancer mortality in 38 European countries, we analyzed data provided by the World Health Organization over the period 1975-2004. Joinpoint analysis was used to identify significant changes in trends. In the European Union (EU), male mortality rates rose by 2.1% per year between 1975 and 1984, by 1.0% between 1984 and 1993, and declined by 1.3% between 1993 and 2004, to reach an overall age-standardized rate of 6.1/100,000 in 2000-2004. Mortality rates were much lower in women, and the rate in the EU rose by 0.9% per year up to 2000, and levelled off to 1.1/100,000 in 2000-2004. In France and Italy - which had the highest rates in the past - male rates have steadily declined during the last two decades (annual percent change, APC=-4.8% in 1998-2004 in France, and -2.6% in 1986-2003 in Italy). Persisting rises were, however, observed in several central and eastern European countries, with exceedingly high rates in Hungary (21.1/100,000; APC=6.9% in 1975-1993 and 1.4% in 1993-2004) and Slovakia (16.9/100,000; APC=0.14% in 1992-2004). In middle aged (35 to 64) men, oral and pharyngeal cancer mortality rates in Hungary (55.2/100,000) and Slovakia (40.8/100,000) were comparable to lung cancer rates in several major European countries. The highest rates for women were in Hungary (3.3/100,000; APC=4.7% in 1975-2004) and Denmark (1.6/100,000; APC=1.3% in 1975-2001). Oral and pharyngeal cancer mortality essentially reflects the different patterns in tobacco smoking and alcohol drinking, including drinking patterns and type of alcohol in central Europe. (c) 2009 UICC.

New considerations on the management of osteoporosis in Central and Eastern Europe (CEE): summary of the "3rd Summit on Osteoporosis-CEE", November 2009, Budapest, Hungary.

INTRODUCTION: In November 2009, the "3rd Summit on Osteoporosis-Central and Eastern Europe (CEE)" was held in Budapest, Hungary. The conference aimed to tackle issues regarding osteoporosis management in CEE identified during the second CEE summit in 2008 and to agree on approaches that allow most efficient and cost-effective diagnosis and therapy of osteoporosis in CEE countries in the future. DISCUSSION: The following topics were covered: past year experience from FRAX® implementation into local diagnostic algorithms; causes of secondary osteoporosis as a FRAX® risk factor; bone turnover markers to estimate bone loss, fracture risk, or monitor therapies; role of quantitative ultrasound in osteoporosis management; compliance and economical aspects of osteoporosis; and osteoporosis and genetics. Consensus and recommendations developed on these topics are summarised in the present progress report. CONCLUSION: Lectures on up-to-date data of topical interest, the distinct regional provenances of the participants, a special focus on practical aspects, intense mutual exchange of individual experiences, strong interest in cross-border cooperations, as well as the readiness to learn from each other considerably contributed to the establishment of these recommendations. The "4th Summit on Osteoporosis-CEE" held in Prague, Czech Republic, in December 2010 will reveal whether these recommendations prove of value when implemented in the clinical routine or whether further improvements are still required.

Graduate labor mismatch in Central and Eastern Europe

[cat] Utilitzant l’enquesta REFLEX/HEGESCO, aquest article explora la probabilitat de desajustament entre educació i treball a l’Europa de l’Est i Central. Classifiquem els països en dos grups segons la transparència dels títols educatius al mercat de treball. Polònia, la República Txeca i Eslovènia formen el grup amb més transparència, i Hongria, Lituània i Estònia formen el grup amb més opacitat. Analitzem tres tipus de desajustaments: el vertical (infra‐, sobre‐educació), l’horitzontal (desajustament del camp d’estudi) i el desajust en habilitats. Focalitzem l’anàlisi en l’efecte dels camps d’estudi i les competències dels individus en el desajustament del mercat laboral en aquests països. Els resultats mostren importants diferències entre els dos grups de països estudiats.

Graduate labor mismatch in Central and Eastern Europe

[cat] Utilitzant l’enquesta REFLEX/HEGESCO, aquest article explora la probabilitat de desajustament entre educació i treball a l’Europa de l’Est i Central. Classifiquem els països en dos grups segons la transparència dels títols educatius al mercat de treball. Polònia, la República Txeca i Eslovènia formen el grup amb més transparència, i Hongria, Lituània i Estònia formen el grup amb més opacitat. Analitzem tres tipus de desajustaments: el vertical (infra‐, sobre‐educació), l’horitzontal (desajustament del camp d’estudi) i el desajust en habilitats. Focalitzem l’anàlisi en l’efecte dels camps d’estudi i les competències dels individus en el desajustament del mercat laboral en aquests països. Els resultats mostren importants diferències entre els dos grups de països estudiats.

The recent decline in mortality from Hodgkin lymphomas in central and eastern Europe

BACKGROUND: Hodgkin lymphoma (HL) is a largely curable disease and its mortality had steadily declined in western Europe since the late 1960s. Only modest declines were, however, observed in central/eastern Europe. MATERIALS AND METHODS: We updated trends in mortality from HL in various European areas up to 2004 and analyzed patterns in incidence for selected European countries providing national data. RESULTS: In most western European countries, HL mortality continued to steadily decline up to the mid 2000s. More recent reductions were also observed in eastern European countries. Overall, mortality from HL declined from 1.17/100,000 (age-standardized, world population) in 1980-1989 to 1.42/100,000 in 2000-2004 in men from the 15 member states of the European Union (EU) from western and northern Europe. In the EU 10 accession countries of central and eastern Europe, male mortality from HL was 1.42/100,000 in 1980-1984, 1.32 in 1990-1994, and declined to 0.76 in 2000-2004. Similar trends were observed in women. No consistent patterns were found for HL incidence. CONCLUSIONS: The present work confirms the persistent declines in HL mortality in western European countries, and shows favorable patterns over more recent calendar years in central/eastern ones, where rates, however, are still at levels observed in western Europe in the early 1990s.