Investment opportunities in Central and Eastern European equity markets: an econometric examination of the risk return relationships for Western investors

This study focuses on the diversification benefits of the most developed equity markets of Central and Eastern Europe (CEE). To evaluate these benefits of diversification we use so-called spanning tests based on a stochastic discount factor approach and estimated by General Methods of Moments (GMM). Spanning tests investigate whether the returns of test assets (in our case the returns of CEE equity markets) can be mimicked by the returns of some benchmark assets. If this is possible adding the test assets to the set of the benchmark assets does not improve the mean-variance efficient frontier ...