Acta Oeconomica
Volume/Issue:
Volume 64: Issue Issue Supplement-1
Global, regional, and country-specific components of financial market indicators
Author:
Zalán Kocsis Magyar Nemzeti Bank (MNB, the central bank of Hungary) Budapest Hungary

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Pages:
81–110
Online Publication Date:
21 Nov 2014
Publication Date:
01 Dec 2014
Article Category:
Research Article
DOI:
https://doi.org/10.1556/aoecon.64.2014.s1.3
Keywords:
variance decomposition; factor analysis; Procrustes rotation; spillover; cross-country correlations; cross-asset correlations; C38; E44; G15
Open access

This paper studies the global, regional, and country-specific components of four key financial market indicators: sovereign CDS spreads, equity indices, exchange rates, and EMBI Global bond spreads. In all four markets, the results support the findings of the literature of a significant global component, but also point out the importance of regional correlations. Variance decompositions point to roughly a third of variance explained by both global and country-specific components in each of the four analysed financial markets, although there is considerable cross-country heterogeneity in this respect. The global factors of indicators are correlated across asset classes, but the market- and country-specific components of indicators are still significantly large to suggest diversification benefits of both multi-asset and multi-country portfolios. An application of the factor model suggests that the link between Central Eastern European and Euro zone periphery markets is stronger and more direct in the case of equity indices than in the case of sovereign CDS spreads.

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Cover Acta Oeconomica
Acta Oeconomica Periodical of the Hungarian Academy of Sciences
Print ISSN:
0001-6373
Online ISSN:
1588-2659

Senior editors

Editors-in-Chief: István P. Székely, Dóra Győrffy

Editor(s): Judit Ványai

Associate Editors

  • Péter Benczúr, Joint Joint Research Center, European Commission
  • Dóra Benedek, International Monetary Fund
  • Balázs Égert, OECD
  • Dániel Prinz, World Bank
  • Rok Spruk, University of Ljubljana, School of Economics and Business, Slovenia

Editorial Board

  • Anders Åslund, Georgetown University and Advisory Council of CASE, USA
  • István Benczes, Corvinus University of Budapest, Hungary 
  • Agnieszka Chłoń-Domińczak, SGH Warsaw School of Economics, Poland
  • Fabrizio Coricelli, University of Siena, Italy
  • László Csaba, Corvinus University of Budapest, Hungary and Central European University, Austria
  • Beáta Farkas, Faculty of Economics and Business Administration, University of Szeged, Hungary
  • Péter Halmai, Budapest University of Technology and Economics, and National University of Public Service, Hungary
  • Martin Kahanec, Central European University, Austria
  • Michael Landesmann, The Vienna Institute for International Economic Studies (WIIW), Austria
  • Péter Mihályi, Corvinus University of Budapest, Hungary
  • Debora Revoltella, European Investment Bank

Corvinus University of Budapest
Department of Economics
Fővám tér 8 Budapest, H-1093, Hungary
E-mail: vanyai.judit@krtk.hu  

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Acta Oeconomica
Language English
Size B5
Year of
Foundation		 1966
Volumes
per Year		 1
Issues
per Year		 4
Founder Magyar Tudományos Akadémia
Founder's
Address		 H-1051 Budapest, Hungary, Széchenyi István tér 9.
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ISSN 0001-6373 (Print)
ISSN 1588-2659 (Online)

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