The paper suggests a nonlinear and multivariate time series model framework that enables the study of simultaneity in returns and in volatilities, as well as asymmetric effects arising from shocks and exogenous variables. The model is employed to study the three closely related Baltic States’ stock exchanges and the influence exerted by the Russian stock exchange. Using daily data, we find recursive structures with returns in Riga directly depending on returns in Tallinn and Vilnius, and Tallinn on Vilnius. For volatilities, both Riga and Vilnius depend on Tallinn. In addition, we find evidence of asymmetric effects of shocks arising in Moscow and in Baltic States on both returns and volatilities.
SNDE recognizes that advances in statistics and dynamical systems theory can increase our understanding of economic and financial markets. The journal seeks both theoretical and applied papers that characterize and motivate nonlinear phenomena. Researchers are required to assist replication of empirical results by providing copies of data and programs online. Algorithms and rapid communications are also published.