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An Empirical Analysis of International Stock Market Volatility Transmission




Type Of Work


  • Scholarly edition

Abstract


  • This paper examines the interplay between stock market returns and their volatility, focus ingon the Asian and global financial crises of 1997-98 and 2008-09 for Australia, Singapore, the

    UK, and the US. We use a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model and weekly data (January 1992-June 2009). Based on

    the results obtained from the mean return equations, we could not find any significant impact on returns arising from the Asian crisis and more recent global financial crises across these

    four markets. However, both crises significantly increased the stock return volatilities across all of the four markets. Not surprisingly, it is also found that the US stock market is the most

    crucial market impacting on the volatilities of smaller economies such as Australia. Our results provide evidence of own and cross ARCH and GARCH effects among all four markets, suggesting the existence of significant volatility and cross volatility spillovers across all four markets. A high degree of time-varying co-volatility among these markets indicates

    that it is riskier for investors to diversify their financial portfolio by acquiring stocks withinthese four countries only.

Publication Date


  • 2010

Edition


Citation


  • Karunanayake, I., Valadkhani, A., & O'Brien, M. (2010). An Empirical Analysis of International Stock Market Volatility Transmission. Retrieved from http://www.uow.edu.au/index.html

Web Of Science Accession Number


Book Title


Volume


Issue


Place Of Publication


Type Of Work


  • Scholarly edition

Abstract


  • This paper examines the interplay between stock market returns and their volatility, focus ingon the Asian and global financial crises of 1997-98 and 2008-09 for Australia, Singapore, the

    UK, and the US. We use a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model and weekly data (January 1992-June 2009). Based on

    the results obtained from the mean return equations, we could not find any significant impact on returns arising from the Asian crisis and more recent global financial crises across these

    four markets. However, both crises significantly increased the stock return volatilities across all of the four markets. Not surprisingly, it is also found that the US stock market is the most

    crucial market impacting on the volatilities of smaller economies such as Australia. Our results provide evidence of own and cross ARCH and GARCH effects among all four markets, suggesting the existence of significant volatility and cross volatility spillovers across all four markets. A high degree of time-varying co-volatility among these markets indicates

    that it is riskier for investors to diversify their financial portfolio by acquiring stocks withinthese four countries only.

Publication Date


  • 2010

Edition


Citation


  • Karunanayake, I., Valadkhani, A., & O'Brien, M. (2010). An Empirical Analysis of International Stock Market Volatility Transmission. Retrieved from http://www.uow.edu.au/index.html

Web Of Science Accession Number


Book Title


Volume


Issue


Place Of Publication