Stock Market’s Short-Term Reactions and Volatility as a Result of Political Instability in Serbia
Independent thesis Advanced level (degree of Master (One Year))Student thesis
Volatility of financial markets has been mathematically defined and well researched, but its causes are harder to identify. Investors’ strategies are based on numerous factors based on well-known theories – EMH, or more behavioral theory. Volatility is especially high around so called “shock-days” when markets undergo sudden extreme changes of its indices (up or down several percent in one trading day). Political instability in a country has been proven to significantly influence market volatility and its returns. Serbian Stock Exchange (BELEX) publishes two indices BELEX15 and BELEXline and though still developing, it also exhibits the described characteristics of financial data series – GARCH analysis confirmed the presence of leptokurtosis, heteroscedasticity and volatility clustering. During the observation period, Serbia has been undergoing very serious political crisis / changes which have had implications on its stock market. Important political (or other type) events have been identified through the analysis of headlines of Serbia’s three main daily newspapers, and these were related to previously identified “shock-days” (change of index equal or more than 4% in any direction) which were recorded on BELEX stock exchange. Analysis confirmed the high correlation between unexpected events on a political stage in Serbia and shock-days occurrence on its stock market. Negative events, i.e. crisis, have had more serious impact on the market, resulting in bigger index changes, and internal politics influenced the market more severely than the unexpected events in other areas (foreign policy, economics…).
Place, publisher, year, edition, pages
2012. , 46 p.
GARCH, Serbia, volatility, political instability, shock-days, short-term stock market reactions
Business Administration Economics
IdentifiersURN: urn:nbn:se:bth-2892Local ID: oai:bth.se:arkivexF658D08111C93CDFC12579CE0046DE13OAI: oai:DiVA.org:bth-2892DiVA: diva2:830187
UppsokSocial and Behavioural Science, Law
firstname.lastname@example.org + 381 62 843 25 212015-04-222012-03-272015-06-30Bibliographically approved