Abstract We study stock market's response to real output shocks in the small and young Eastern European frontier markets, and compare to the larger European emerging- and world's most developed… Click to show full abstract
Abstract We study stock market's response to real output shocks in the small and young Eastern European frontier markets, and compare to the larger European emerging- and world's most developed markets. To obtain a complete time profile of stock market's response, we use a Vector Auto-regression with Asymmetric Leads (VARwAL) model, which is a special case of the mix (noncausal) VARs. Results confirm its efficacy: in every country, both the forward-looking and delayed components of stock market's response are significant. Stock market returns forecast future real output equally well in Eastern European frontier markets as in developed and larger-emerging markets. The distant-horizon forward-looking response is larger in frontier markets, whereas the near-horizon forward-looking response is larger in developed markets.
               
Click one of the above tabs to view related content.