Abstract:

The possibility of financial contagion to the other markets determined by crisis episodes have received a much bigger attention in recent years. Financial markets integration it is an important topic because it increases the negative effects of the financial crises and transmittance among the markets. All this aspects increase the risk on financial markets, and in the same time decrease the benefits of portfolio diversification of investors, since markets move together. The aim of this research is to detect any significant interactions among the stock markets from the EU countries from the Central and Eastern Europe. This paper particularly apply cointegration tests for a set of 6 markets (Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia). The results highlight that during financial crisis countries seem to show a higher financial integration among them. We found 9 cointegrating relationships during financial crisis and only 5 during the post-crisis period. Financial markets that are found to be closely linked (Czech Republic, Hungary, Romania and Slovakia) determine the spread of financial crisis effects by contributing to contagion in financial markets or if we look from the other side the presence of contagion lead to an increase in the cointegration of the financial markets.