University of Michigan-Flint

Faculty Name:  Seyed Mehdian

Department:  School of Management

Campus Address:  While Building

Email:  seyed@umflint.edu

Phone:  810-762-3318

Project Description:  The understanding of the correlations among financial asset returns and the level of dissemination of information across financial asset markets is essential for money managers to establish / structure optimal portfolios. This knowledge becomes more vital as the internationalization and integration of emerging financial market continue at a rapid speed.

For instance, the degree of integration of Eastern European financial markets and flow of capital among these markets have become extremely important factor in process of asset selections. While the relationship among emerging and advanced financial markets has investigated extensively, little attention has been focused on the study of the degree of integration of newly joint European Union countries of Eastern Europe. The objective of our paper is to fill this gap in the literature.

More specifically, we examine the efficiency of the transmission of information across stock markets of Romania, Bulgaria, Czech Republic, Poland, Slovenia and Hungary, that have joined the European Union since 2007, respectively 2004, in order to shed light on degree of integration of these equity markets. In addition, we examine the relative importance of advanced equity markets of Europe (London Stock Exchange Group, NYSE-Euronext and Deutsche Börse Group) on these Eastern European equity markets in case of transmissions of price innovations, as well as the influence of the Austrian capital market, with the view to the creation of the Central and Eastern Europe Stock Exchange Group (CEESEG),  leaded by Vienna Stock Exchange and incorporating Budapest Stock Exchange, Ljubljana Stock Exchange and Prague Stock Exchange. We take into consideration the recent transformations in the European stock markets, including the effervescence for partnerships or acquisitions, for expanding the regional influence, in the Central and Eastern Europe area. We expect more and more correlated data in CEE area after CEESEG creation in 2009, as well as for the Warsaw Stock Exchange (individually taken, the most important stock exchange from the Central and Eastern Europe and a significant regional actor), with Euronext, after the strategic co-operation agreement and in the context of its imminent privatization.

To investigate the nature of transmission of information, the effect of external price innovations and shocks across the equity markets under study, and the interdependency of the national stock markets, we employ three econometric models. These models are estimated in framework of maximum likelihood regression, GARCH, and vector autoregression (VAR).

Semesters Desired:  Fall 2011 AND Winter 2012

GSRA Position Description:  locate data sources, collect and manage data, and provide review of literature support and general research assistance.

Specific Day/Time Requirements:  open

Special Requirements:  Be familiar to collect and manage data, be able to get access to professional articles online and to use Excel.

Graduate Students in These Programs May Apply:  Business Administration (MBA)