A long-run relationship between Eastern European stock markets? Cointegration and the 1997/98 crisis in emerging markets

A Long-Run Relationship between Eastern European Stock Markets? Cointegrati on and the 1997/98 Crisis in Emerging Markets. - This paper describes the b ehavior of the Eastern European stock price indices for the period between 1995 and 1998. Particular emphasis has been directed toward the effects of the 1997/98 emerging market crisis. Using the Johansen methodology, a long- run relationship connecting these markets can be found for the pre-crisis p eriod. The common stochastic trend vanished following the third quarter of 1997, and a massive change in the short-run behavior of the markets is show n. Developments on the Russian exchange are found to have a dominating infl uence during that period.