Abstract - Measuring the Riskiness of Equity Markets in Eastern and Central Europe

The general objective of the underlying research was to study the effects of international diversification of equity portfolios on the development of the emerging capital markets of the new Central and Eastern European (CEE) member states of the European Union. For the purpose of comparison the Russian Federation was also involved in the database. The main idea of the particular paper is based on the fact that the selection of a correct measure of risk is very important in those situations when the stock markets are extremely volatile. In the recent history of the CEE stock markets we can easily find such examples. In the first part of the presentation some theoretical properties of the different risk measures will be clarified and the applicability of those measures will be compared and contrasted. In the second part it will be examined whether it is necessary to use other risk measures than the variance in evaluating the riskiness of the equity markets in Eastern and Central Europe. Furthermore, the performance of different risk measures will be studied on an empirical basis. The empirical part of the investigation is based on a comprehensive stock exchange database of 17 countries, which consists of the eight new CEE members of the enlarged EU, Russia as well as eight developed markets. 

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