81-100

• Bialkowski, Jedrzej

In this paper a Markov switching mixture of normal distributions is applied to the monthly returns on the main stock indices for emerging financial markets in central Europe (BUX, PX50 and WIG). Additionally the results are compared to those obtained for western Europe (DAX, CAC40 and FTSE100). The results of model comparison suggest that the Markov switching mixture of normal distributions has substantially more descriptive validity than a single normal distribution. Nevertheless, there is no clear indication that, in modelling monthly returns, the Markov switching mixture of three normal distributions is superior to the mixture of two. Finally, the ability of the models to describe returns during international financial crises is evaluated.

• Economics and Business
• Computer and information sciences

• Finance
• Economics
• Statistics

Markov switching mixture of normal distributions, modelling returns, emerging stock markets in central Europe, international financial crises

Περιέχει πίνακες, διαγράμματα και βιβλιογραφία, The author would like to thank Professor Kwan Choi, Professor Nicolas Sarantis, and other participants of the EEFS conference in Bologna 2003 for many useful suggestions on a previous version of this work. Also the author would like to thank the three anonymous referees for valuable comments on a previous draft of this paper. Of course, any remaining errors remain the responsibility the author., JEL Classification: C22, E37, F36, G12