Are there benefits from trading strategy based on the returns spillovers to the emerging stock markets? Evidence from Poland

Janusz Brzeszczyński*, Aleksander Welfe

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)

Abstract

This study investigates benefits from a trading strategy based on the spillovers from international stock markets to the Polish emerging stock market. The analysis is conducted within the framework of factor and predictive generalized autoregressive conditional heteroskedasticity (GARCH) models of the Warsaw Stock Exchange main index, WIC. We apply an approach in which the mean equation of the GARCH model includes a deterministic part incorporating cross-markets linkages. Both in-sample and out-of-sample forecasts from the estimated models are calculated. The trading strategy is based on signals from the out-of-sample predictions. The models' performance and benefits from adopting such a strategy are evaluated using direction quality measures. Our results suggest that predictive models using cross-market linkages can produce superior out-of-sample forecasts compared to benchmarks.

Original languageEnglish
Pages (from-to)74-92
Number of pages19
JournalEmerging Markets Finance and Trade
Volume43
Issue number4
DOIs
Publication statusPublished - Aug 2007
Externally publishedYes

Fingerprint

Dive into the research topics of 'Are there benefits from trading strategy based on the returns spillovers to the emerging stock markets? Evidence from Poland'. Together they form a unique fingerprint.

Cite this