Analysing Eastern European Emerging Markets using a T-GARCH and E-GARCH model

摘要

Eastern European Emerging Markets (EEEM's) have been superficially analysed in the literature. In this paper, the authors use a T-GARCH and E-GARCH approach to model volatility in eleven EEEM's. Data includes daily returns from 2004 to 2011. The main findings show higher unconditional volatility in EEEM's than in developed markets, but risk premium is statistically negative or non significant. Moreover, almost all markets show an important and significant leverage effect and volatility is more difficult to predict in EEEM's. Finally, no significant differences are found among countries inside and outside European Union, bringing in question the benefits of EU integration.