An econometric analysis of financial markets in Eastern Europe : the case of Poland
2014-12-15T10:36:45Z (GMT) by
In recent years, the economies of Eastern Europe have experienced a complete breakdown of their political and economic structures in the transition process. These changes have led to the emergence of a financial sector, the infrastructure of which has had to be established practically from scratch. In Poland, the most important non-bank financial sector, the Warsaw Stock Exchange (WSE), has played an essential role in the privatisation process and in providing an alternative source of finance and investment amongst firms and households. In this thesis, we provide an econometric analysis of asset returns on the WSE.;On the WSE, there exists a one-period censoring of asset returns moving beyond a pre-specified range introduced to limit speculative behaviour and volatility on the market. Our principal aim has been to incorporate such a feature into any analyses undertaken. Considering predictability, in an explicit intertemporal model of an investor's effective demand for a single asset facing a binding quantity constraint, we show that the market may not be predictable and return predictability on such constrained markets is non-trivial. Proposing an approach to model the predictability of returns, we find evidence of predictability of six main returns series on the WSE.;Considering the volatility of asset returns, we investigate whether the finding for developed stock markets that negative shocks entering the market lead to a larger return volatility than positive shocks of a similar magnitude also applies to two emerging Eastern European markets. Concentrating on the WSE and the Budapest Stock Exchange, we therefore also examine whether the findings differ depending on the exchanges' institutional microstructures. We propose an approach to model the conditional volatility of returns on a quantity constrained market such as the WSE and find no evidence of an asymmetric impact of news on the volatility of returns on either exchange.