The volatility of bank stock prices and macroeconomic fundamentals in the Pakistani context: an application of GARCH and EGARCH models




bank stock return, OLS-HAC, GARCH, EGARCH


Research Background: The banking sector plays a crucial role in the world?s economic development. This research paper evaluates the volatility spillover, symmetric, and asymmetric effects between the macroeconomic fundamentals, i.e., market risks, interest rates, exchange rates, and bank stock returns, for the listed banks of Pakistan.

Purpose of the article: The main purpose of this study is to examine the volatility of Pakistani banking stock returns due to the influence of market risk, interest rates, and exchange rates. Pakistan is selected for the study because the volatility of its banking stock returns is strongly influential in achieving sustainable economic development.

Methods: By applying the OLS with the Heteroskedasticity and Autocorrelation Consistent (HAC) covariance matrix, the GARCH (1, 2), and the EGARCH (1, 1), analysis is conducted for the period from January 1, 2009 to December 31, 2019 using samples of 13 listed banks.

Findings & Value added: The ARCH parameter is significant in the OLS with the HAC covariance matrix estimation, which is a clear indication of the existence of heteroskedasticity in the squared residuals and the inaccuracy of the OLS with the HAC covariance matrix. The results of the OLS with the HAC covariance matrix suggest using the GARCH model family to accurately measure the volatility of bank stock prices. The results of the mean equation in the GARCH (1, 2) and EGARCH (1, 1) indicate the positive significance of market risk and the low significance of interest and exchange rates, confirming that market returns strongly affect the sensitivity of bank stock returns compared to interest and exchange rates. It should be noted that the ARCH (?) and GARCH (?) parameters of the variance equation fulfill the non-negative conditions of the GARCH model. Furthermore, the leverage parameter (?) is found to be positively significant for all banks, and volatility is found to be influenced by positive shocks compared to negative shocks. Conclusively, it can be stated that market returns determine the dynamics of the conditional returns of bank stocks. Nevertheless, the interest and exchange rate volatilities determine the conditional bank stock returns? volatility.


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Contact to corresponding author:; University of Szczecin, ul. Mickiewicza 64, 71-101 Szczecin, Poland

Iwona Markowicz

University of Szczecin, Poland

Paweł Baran

University of Szczecin, Poland

A new method for calculating mirror data asymmetry in international trade

JEL Classification: F14; C10; C82

Keywords: international trade; intra-community trade; mirror data; COMEXT


Research background: Some statistics are of a bilateral nature. This is how foreign trade data is organized. They are recorded both in the supplier and recipient countries, hence they are called mirror data. The data recorded at both trading partner countries are not the same for different reasons. Such differences between data on the same groups of transactions are often referred to as the asymmetry of mirror data. The information about the value of the flows of goods are of great importance in economic analyses and therefore their quality is particularly important.

Purpose of the article: The aim of this paper is to present a new measure of data asymmetry ? the aggregated quantity index with value-based weights.

Methods: The proposed measure combines the quantity and the value of turn-over in individual trade relations. Such a measure makes it possible to eliminate basic deficiencies in value-based measures, while considering the specificity of trade in individual countries. The proposed measure of data asymmetry was confronted with several measures present in the literature and previously used by the Authors. The numerical example uses Comext data on intra-Community trade in 2017 provided by Eurostat.

Findings & Value added: The proposed measure performs better than all the previously used data asymmetry indices. It is to some extent immune to exchange rate differences and inconsistencies resulting from the inclusion of transport and insurance costs in the value of goods. In addition, it gives lower weights to unimportant trade directions than other data asymmetry indices. Since the new index has proved to be better than the measures previously used, it is worth applying to those trade relations where the data are not de-rived from customs documents, but from declarations made by businesses, as in the case of intra-Community trade.


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Contact to corresponding author:; University of Lodz, Department of Economic and Social Statistics, ul. Rewolucji 1905 r. 41, 90-214 Lodz

Elżbieta Roszko-Wójtowicz

University of Lodz, Poland

Maria M. Grzelak

University of Lodz, Poland

Macroeconomic stability and the level of competitiveness in EU member states: a comparative dynamic approach

JEL Classification: C30; E01

Keywords: macroecnomic stabilisation pentagon; competitiveness; competitive position; competitive capacity; Hellwig's method; linear ordering; European Union


Research background: The choice of the issue of international competitive-ness of economies as the research problem addressed in this paper has been mainly dictated by the changes observed in the nature of the development of EU economies and the need to assess the competitiveness of the Polish economy. It is time to evaluate and learn from the largest enlargement in the history of the EU which took place in May 2004. An assessment of changes in the state of EU economies, including the Polish economy, is in the centre of research interest of many scientists. National competitiveness is the subject of a great deal of research and economic studies. Integration and globalisation processes in the world economy are the main reasons for the popularity of this topic. The efficient use of sources and factors determining the competitiveness of economies, sectors and enterprises is associated with prosperity over the long term. One of the methods based on the observation of selected basic indicators of economic competitiveness is the method of analysis called the macroeconomic stabilisation pentagon. The method illustrates the extent to which the government achieves five macroeconomic objectives. It is very difficult, if not impossible, to meet all these objectives at the same time. The difficulty of meeting all these goals concurrently is due to the fact that they are more or less competitive rather than complementary. The proposed assessment of competitiveness based on the developed model of macroeconomic stabilisation pentagon is a unique approach in terms of discussion of country?s competitiveness. This approach significantly distinguishes the current study in comparison with standard international reports on competitiveness such as the Global Competitiveness Index or the EU Regional Competitiveness Index.

Purpose of the article: The main aim of the paper is to assess the competitiveness of EU economies in the years 2005?2018, based on a selected set of diagnostic variables referring to the concept of macroeconomic stabilisation pentagon. The paper also formulates a detailed list of four research hypotheses.

Methods: In order to characterise the competitiveness of the European Union economies, including the EU?15 and EU?13 groups, as well as the Visegrad group, six diagnostic variables affecting the economic situation of individual EU countries were analysed. The variables for analysis were chosen so as to reliably describe the competitive position of a given country, at the same time referring in a substantive sense to the concept of macroeconomic stabilisation pentagon. The linear ordering of objects was made using the reference Hellwig method. The selected method enabled the development of competitiveness rankings of EU Member States in the years 2005, 2009, and 2018.

Findings & Value added: The comparative analysis of the main macroeconomic indicators conducted in the paper forms the basis for assessing the cur-rent state of the EU economy in relation to other countries. In the paper, the authors depart from the standard elaboration of ?magic pentagon.? Instead, they apply the variables used in the macroeconomic stabilisation pentagon analysis to develop competitiveness rankings of EU Member States. The con-ducted empirical study has confirmed that the 15th anniversary of EU member-ship had a decidedly positive impact on the level of economic development of the EU?13 countries.


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Contact to corresponding author:; Faculty of Mining, Ecology, Process Control and Geotechnologies, Technical university of Košice, Komenského 1096/19, 040 01 Košice, Slovak Republic

Beata Gavurova

Technical university of Košice, Slovakia

Jaroslav Belas

Tomas Bata University in Zlín, Czech Republic

Yuriy Bilan

Rzeszów University of Technology, Poland

Jakub Horak

Institute of Technology and Business in Ceske Budejovice, Czech Republic

Study of legislative and administrative obstacles to SMEs business in the Czech Republic and Slovakia

JEL Classification: L26; O16

Keywords: small and medium-sized enterprises; SMEs; legislative obstacles; administrative obstacles; business environment; stability of business environment


Research background: SMEs represent an integral part of the economy environment in a majority of the countries all over the world. They signify the most efficient, progressive, and important part of the advanced economies. The long-term effort of the EU countries, as well as other advanced economies is to create quality and stable conditions for their development in order to be able to respond to all the possible changes in the business environment that is being changed to more and more comprehensive in the recent time.

Purpose of the article: The objective of the contribution is to examine administrative and legislative obstacles to SMEs business in the Czech Republic and Slovakia and the quantification of the differences in perceiving legislative and administrative obstacles to business by entrepreneurs in both countries.

Methods: A questionnaire survey was conducted within SMEs in the Czech Republic and Slovakia in 2019. The research sample included 641 SMEs, 312 from the Czech Republic and 329 from Slovakia. We focused on 5 dimensions related to legislative and administrative obstacles to SMEs business within which selected statements were examined. Contingency tables were used to analyze the ratios of the examined variables.

Findings & Value added: The differences detected in both countries in the respondents´ perception and assessment are evidence of the changes in the business environment of both countries, giving rise to the questions about the extent to which the legislative and administrative obstacles, as well as the obstacles related to law enforcement and bureaucracy are acceptable and by which groups of entrepreneurs. The results of the research provide valuable findings for the creators of regional and national policies, and represent a valuable basis for the creation of the concepts focused on the SMEs´ development in both countries. The results of the study also support the implementation of follow-up research in this area that will reveal other determinants affecting the development of SMEs. They also create a valuable platform for the construction of national and international benchmarking indicators in this area and the implementation of comparative analyses. This will also support the methodological area necessary for a creation of high-quality concepts and strategies.


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Contact to corresponding author:; University of Prešov in Prešov, Faculty of Management, Konštantínová 16, 080 01 Prešov, Slovakia

Robert Stefko

University of Prešov in Prešov, Slovakia

Richard Fedorko

University of Prešov in Prešov, Slovakia

Radovan Bacik

University of Prešov in Prešov, Slovakia

Martin Rigelsky

University of Prešov in Prešov, Slovakia

Maria Olearova

University of Prešov in Prešov, Slovakia

Effect of service quality assessment on perception of TOP hotels in terms of sentiment polarity in the Visegrad group countries

JEL Classification: M31; L83; D12

Keywords: sentiment polarity; customer satisfaction; hotel; Visegrad group


Research background: In the developed countries, the services sector, which also includes the accommodation services, is a significant source of the gross national product. Tourism can be perceived as an important determinant of countries' economies, so attention paid to the needs of clients is at least necessary and beneficial.

Purpose of the article: The aim of the study is to assess the quality of services provided and the perception of the hotel from the point of view of the accommodated clients. This objective was fulfilled by determining the effect of selected indicators of perception of the quality of provided services (location, personnel evaluation, cleanliness, equipment, comfort, price/quality ratio of provided services, free Wi-Fi connection) on the indicator determining the perception of the hotel (polarity of sentiment).

Methods: In the analysis of the above, 22,000 text-reviews of 117 five-star hotels of the Visegrad Group countries were evaluated. The hotel reviews were obtained from and indicator rankings from The analysis made use of the regression analysis methods ? influence (regulatory models ? Ridge, Lasso, Elastic net, and multiple linear regression ? OLS).

Findings & Value added: It has been found out that hotel equipment and cleanliness have the greatest effect on the polarity of sentiment. As could be expected, the trend has an upward tendency ? that is, as quality increases, so does the sentiment polarity ? the perception of hotel facilities. Overall, the analysed sentiment variables can be considered positive, as was confirmed by the positive coefficients of the coherence analysis (Spearman-?; Pearson-r), as well as the upward trend in the predictions under the regression analysis. Hotels should be strategically customer-oriented and, as the analyses show, pay the greatest attention to equipment and cleanliness. The services of accommodation facilities are dominant in terms of satisfaction with the destination in general, so in the long run, they should be given due attention. These findings are particularly beneficial for hotel services provided in the Visegrad Group countries, as no research studies have yet been carried out on customer evaluation of the quality of accommodation facilities using the presented methods.


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How to Cite

Mohsin, M., Naiwen, L., Zia-UR-Rehman, M., Naseem, S., & Baig, S. A. (2020). The volatility of bank stock prices and macroeconomic fundamentals in the Pakistani context: an application of GARCH and EGARCH models. Oeconomia Copernicana, 11(4), 609–636.