ANALYSING TIME-VARYING INTERRELATIONSHIP AMONG THE BALKAN, DEVELOPED EUROPEAN AND US STOCK MARKETS

This paper explores the dynamic conditional correlations among five Balkan stock markets and the mature markets (the US and EU50), leading to several important findings. First, the dynamic correlations are much higher among the emerging Balkan markets (Romania, Croatia, and Bulgaria). This is also the case when other measures of correlation, such as Spearman's rho, Kendall's tau, and Pearson's r, are applied. In addition, the Balkan markets show lower correlation with the US than with the EU markets. Furthermore, correlation increased during the global financial crisis and it remained high during the European sovereign debt crisis. However, there was no significant increase in correlation during the stock market instability of summer 2015. Lastly, to determine whether the transmission mechanism to the emerging Balkan markets (excluding Greece) works through the EU index and Greece, we first control the role of the EU index and document that there is no significant correlation between the US and almost all the Balkan markets (save for Turkey). Further controlling the role of Greece does not have a major impact on Balkan markets.