2026/06/22 by Goran Hristovski, Gjorgji Gockov
Economics, Econometrics and Finance · #Diversification (marketing strategy) #Efficient frontier #Financial Markets and Investment Strategies #Financial Risk and Volatility Modeling #Market Dynamics and Volatility #Portfolio #Portfolio optimization #Rate of return on a portfolio #Sharpe ratio #Social connectedness #Stock (firearms) #Volatility (finance)
paper · doi:10.1556/032.2026.00295
published in Acta Oeconomica 76(2), 274-300 (Akadémiai Kiadó)
openalex publication_date 2026/06/22 · crossref created 2026/06/22 · openalex created_date 2026/06/23 · crossref issued 2026/07/03 · crossref published 2026/07/03 · crossref published-print 2026/07/03 · openalex updated_date 2026/07/25 · crossref deposited 2026/07/29 · crossref indexed 2026/07/29
Abstract This study examines spillovers between Southeast European (SEE) equities and global and alternative assets and embeds these dynamics into portfolio allocation. Using the Diebold-Yilmaz framework within a TVP-VAR, we trace return spillovers across thirteen markets: SEE indices; developed benchmarks (S&P 500, Euro Stoxx 50); commodities (oil, gold); listed alternatives (private equity, real estate); and Bitcoin. Three results emerge. First, SEE markets, commodities, and crypto are predominantly net receivers, whereas developed benchmarks and listed alternatives are persistent transmitters. Second, connectedness is moderate in tranquil periods (25–40%) but surges to ∼80% during systemic stress (COVID-19). Third, North Macedonia's MBI10 is a net receiver, mainly from CROBEX and SBITOP, with persistent net transmission only to BELEX15. Building on this, we evaluate the Minimum Variance Portfolio (MVP), the Minimum Correlation Portfolio (MCP), and a novel Minimum Connectedness Portfolio (MCoP). MVP attains the highest Sharpe ratio; MCP delivers the strongest cumulative returns; and MCoP lowers volatility and improves hedging effectiveness relative to MCP while delivering higher average returns than MVP. Including MBI10 improves returns, reduces volatility, and raises risk-adjusted performance across all strategies, largest under MCoP, highlighting the diversification role of frontier markets and the value of connectedness-aware portfolio design.