Characterizing the Volatility Transmission Across International Stock Markets

Mitra, Amarnath and Iyer, Vishwanathan and Joseph, Anto (2015) Characterizing the Volatility Transmission Across International Stock Markets. Theoretical Economics Letters, 5. pp. 571-583.

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Abstract

The present study attempts to track the transmission of volatility across major international stock markets over a span of 20 years, which includes both crisis (contagion form) and non-crisis periods. It also investigates whether global transmission of volatility follows a pattern. The study uses bi-variate EGARCH model in order to capture spillover between a pair of stock markets and the estimation window is one year with a sliding frequency of one quarter. The results show that, there is a spillover of volatility between international stock markets at all times. Results also indicate that in almost all cases, the pattern of spillover is non-random. Finally, the study characterizes the spillover pattern between international stock markets using suitable theoretical distributions.

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