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International transmission of stock returns and volatility: empirical comparison between friends and foes

International transmission of stock returns and volatility: empirical comparison between friends and foes
International transmission of stock returns and volatility: empirical comparison between friends and foes
This paper investigates stock market mean returns and volatility spillover between stock markets of political and friendly countries. The potential foes and friends are selected according to the political situations in the past ten years. The three pairs of foes tested are Israel-Jordan, India-Pakistan, and Greece-Turkey. The United States has been historically and traditionally friendly toward these six countries. Spillover between the United States and these countries is also investigated. The empirical tests are conducted by means of a nonlinear GARCH-t model. Results indicate bidirectional mean and volatility spillover between two countries not on friendly terms. Results also provide ample evidence that mean and volatility spillover takes place from a larger distant friendly country (the United States) to these smaller emerging markets, but not much the other way around.
garch-t, meteor shower, spillover, volatility
1540-496X
33-52
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728

Choudhry, Taufiq (2004) International transmission of stock returns and volatility: empirical comparison between friends and foes. Emerging Markets Finance and Trade, 40 (4), 33-52.

Record type: Article

Abstract

This paper investigates stock market mean returns and volatility spillover between stock markets of political and friendly countries. The potential foes and friends are selected according to the political situations in the past ten years. The three pairs of foes tested are Israel-Jordan, India-Pakistan, and Greece-Turkey. The United States has been historically and traditionally friendly toward these six countries. Spillover between the United States and these countries is also investigated. The empirical tests are conducted by means of a nonlinear GARCH-t model. Results indicate bidirectional mean and volatility spillover between two countries not on friendly terms. Results also provide ample evidence that mean and volatility spillover takes place from a larger distant friendly country (the United States) to these smaller emerging markets, but not much the other way around.

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More information

Published date: 2004
Keywords: garch-t, meteor shower, spillover, volatility

Identifiers

Local EPrints ID: 52068
URI: https://eprints.soton.ac.uk/id/eprint/52068
ISSN: 1540-496X
PURE UUID: 175c6bec-4625-4f4e-8f6c-aaf3b01d4034

Catalogue record

Date deposited: 13 Jun 2008
Last modified: 13 Mar 2019 20:46

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Contributors

Author: Taufiq Choudhry

University divisions

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