Idiosyncratic Volatility Transmission Between Visegrad Stock Markets-The Robust Quantile Estimates

Živkov, Dejan and Lončar, Sanja and Stankov, Biljana (2023) Idiosyncratic Volatility Transmission Between Visegrad Stock Markets-The Robust Quantile Estimates. Economic Computation and Economic Cybernetics Studies and Research, 57 (1). pp. 251-266. ISSN 0424-267X

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Abstract

This paper investigates the idiosyncratic volatility transmission effect between four stock markets of Visegrad group countries. The research process involves isolation of the global market noises from the empirical timeseries, the use of an innovative NAGARCH-NIG model for conditional volatility creation and risk transmission measurement via a robust quantile regression model. We find that the highest volatility spillover effect exists between Prague, Warsaw and Budapest stock markets, whereas Bratislava stock market receives and transmits a very low level of volatilities towards other three markets, regarding both tranquil and crisis periods. The most likely reason for such findings is the fact that the Slovakian stock market has the lowest level of market capitalisation and the lowest average daily trading volumes. However, this makes the SAX index a very suitable investment instrument in combination with the other three indices, whereas the best combination is the SAX index with WIG.

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