G15 - International Financial MarketsReturn

This study evaluates Hungary’s equity market using Damodaran’s country risk premium (CRP) framework to estimate its cost of equity and assess investment attractiveness within the Central and Southeast European context. The paper integrates Hungary’s sovereign credit rating, default spread, and a volatility adjustment to compute an implied cost of equity of approximately 11.5%, placing it among the least risky regional markets. The methodology benchmarks Hungary against peers including Romania, Slovakia, Serbia, Bosnia, and North Macedonia using key structural indicators such as market capitalization, turnover, P/E ratios, and foreign ownership. Findings show that Hungary benefits from deeper market liquidity, broader investor participation, and stronger integration with global capital markets compared to its frontier neighbors. However, institutional and political risks—particularly EU governance disputes—continue to inflate its risk premium above fundamentals. The results underscore how sovereign risk, market structure, and integration interact to shape equity valuations. The study concludes that targeted reforms aimed at enhancing governance and investor protections could lower Hungary’s risk premium and align it more closely with developed EU markets, offering a roadmap for peer economies undergoing similar transitions.
Implications for Central European audience: The paper provides a replicable framework for evaluating equity risk in post-socialist economies. Hungary’s example illustrates how institutional quality, liquidity, and policy credibility jointly influence investment outcomes. These insights can guide reforms and capital market strategies across Central and Eastern Europe.

This study examines the dynamic connectedness between Bitcoin and various financial assets, including the stock market, gold, oil, bonds, and exchange rates, as well as explores portfolio strategies involving these assets. The study covers the period from January 2, 2015, to March 1, 2024. The quantile connectedness approach and portfolio strategies are utilized in the analysis. The findings are as follows: Intermarket volatility spillover significantly increases under extreme conditions. Bitcoin emerges as a transmitter during bullish markets and acts as a receiver in bearish and normal market conditions. Gold serves as a receiver in extreme conditions and a transmitter in normal conditions. Unlike gold, oil acts as a transmitter under extreme conditions and functions as a receiver under normal conditions. Among the fundamental markets, the stock market is the most significant shock transmitter. In risk-mitigating portfolios, the proportion of Bitcoin is low, while the proportions of gold and the dollar index are high. Bitcoin has been found to have low hedging properties.
Implications for Central European Audience: Since the emergence of Bitcoin in 2008, the cryptocurrency market has developed rapidly. Bitcoin and cryptocurrencies have come to occupy an important place in financial markets in terms of value and volume. Bitcoin can affect portfolio management in the financial system in terms of diversification, hedging, risk management, portfolio strategies, and linkages between financial assets. This study investigates the linkages, hedging and portfolio strategies between Bitcoin and the stock market, gold, oil, bond and exchange rate markets. The results of the study are important for portfolio managers, risk managers, financial analysts and economic managers.

This paper examines the roles played by market interdependence and contagion in the propagation of the 2007-2009 global financial crisis. For this purpose, five aggregate indices were employed, representing all the major financial markets from each geographical region. The data series are daily and they cover the period between 2002 and 2014. The presence of contagion and market interdependence was assessed by means of the values and value changes of the correlation coefficients between the ante crisis (2002-2007), the crisis (2007-2009) and the post crisis (2009-2014) intervals, as well as with the aid of a spillover index. The results indicate a high degree of interdependence between the global financial markets even before the occurrence of the crisis. On the other hand, there is evidence that the crisis spread through contagion mainly from the developed financial markets of Europe and North America to the emerging centers in Africa and Latin America while the markets from the Asia/Pacific region displayed lower correlations which may have given opportunities for the mitigation of losses. Moreover, since the majority of the correlation coefficients have not decreased significantly after the 2007-2009 period, it seems that the crisis intensified the degree of global financial integration.