Research Output
Are There Benefits from Trading Strategy Based on the Returns Spillovers to the Emerging Stock Markets? Evidence from Poland
  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, WIG. 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.

  • Date:

    31 January 2007

  • Publication Status:

    Published

  • Publisher

    Informa UK Limited

  • DOI:

    10.2753/ree1540-496x430404

  • ISSN:

    1540-496X

  • Funders:

    Historic Funder (pre-Worktribe)

Citation

Brzeszczynski, J., & Welfe, A. (2007). Are There Benefits from Trading Strategy Based on the Returns Spillovers to the Emerging Stock Markets? Evidence from Poland. Emerging Markets Finance and Trade, 43(4), 74-92. https://doi.org/10.2753/ree1540-496x430404

Authors

Keywords

direction quality measures, emerging market, factor GARCH, in-sample versus out-of-sample forecasts, predictive GARCH, stock market, trading strategy

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