Volatility and Links between National Stock Markets
AbstractThe authors attempt to account for the covariances between stock markets and to assess their integration. They estimate a factor model for sixteen national stock market returns whose volatility is induced by changing volatility in the factors. Unanticipated returns depend on innovations in economic variables and 'unobservable' factors. Assets risk premia are linear combinations of the factors risk premia. The authors find that idiosyncratic risk is priced and the 'price of risk' is different across stock markets. Besides, only a small proportion of their covariances can be accounted for by 'observable' economic variables. Correlation changes are driven primarily by movements in 'unobservables.' Copyright 1994 by The Econometric Society.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 62 (1994)
Issue (Month): 4 (July)
Other versions of this item:
- Mervyn King & Enrique Sentana & Sushil Wadhwani, 1990. "Volatiltiy and Links Between National Stock Markets," NBER Working Papers 3357, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September.
- Sentana, E., 1994. "The Likelihood Function of a Conditionally Heteroskdastic Factor Model with Heywood Cases," Papers 9420, Centro de Estudios Monetarios Y Financieros-.
- Mervyn A. King & Sushil Wadhwani, 1989.
"Transmission of Volatility Between Stock Markets,"
NBER Working Papers
2910, National Bureau of Economic Research, Inc.
- Diebold, Francis X & Nerlove, Marc, 1989.
"The Dynamics of Exchange Rate Volatility: A Multivariate Latent Factor Arch Model,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 4(1), pages 1-21, Jan.-Mar..
- Francis X. Diebold & Marc Nerlove, 1986. "The dynamics of exchange rate volatility: a multivariate latent factor ARCH model," Special Studies Papers 205, Board of Governors of the Federal Reserve System (U.S.).
- Robert F. Engle & Victor Ng & Michael Rothschild, 1988.
"Asset Pricing with a Factor Arch Covariance Structure: Empirical Estimates for Treasury Bills,"
NBER Technical Working Papers
0065, National Bureau of Economic Research, Inc.
- Engle, Robert F. & Ng, Victor K. & Rothschild, Michael, 1990. "Asset pricing with a factor-arch covariance structure : Empirical estimates for treasury bills," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 213-237.
- George M. von Furstenberg & Bang Nam Jeon, 1989. "International Stock Price Movements: Links and Messages," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 125-180.
- Fama, Eugene F. & French, Kenneth R., 1988. "Dividend yields and expected stock returns," Journal of Financial Economics, Elsevier, vol. 22(1), pages 3-25, October.
- S. Grossman & R. Shiller, .
"The Determinants of the Variability of Stock Market Price,"
Rodney L. White Center for Financial Research Working Papers
18-80, Wharton School Rodney L. White Center for Financial Research.
- Grossman, Sanford J & Shiller, Robert J, 1981. "The Determinants of the Variability of Stock Market Prices," American Economic Review, American Economic Association, vol. 71(2), pages 222-27, May.
- Sanford J. Grossman & Robert J. Shiller, 1981. "The Determinants of the Variability of Stock Market Prices," NBER Working Papers 0564, National Bureau of Economic Research, Inc.
- Roll, R., 1989. "Price Volatility, International Market Links, And Their Implications For Regulatory Policies," Papers t10, Columbia - Center for Futures Markets.
- Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
- James Dunn, 1973. "A note on a sufficiency condition for uniqueness of a restricted factor matrix," Psychometrika, Springer, vol. 38(1), pages 141-143, March.
- James M. Poterba & Lawrence H. Summers, 1987.
"The Persistence of Volatility and Stock Market Fluctuations,"
NBER Working Papers
1462, National Bureau of Economic Research, Inc.
- Poterba, James M & Summers, Lawrence H, 1986. "The Persistence of Volatility and Stock Market Fluctuations," American Economic Review, American Economic Association, vol. 76(5), pages 1142-51, December.
- James M. Poterba & Lawrence H. Summers, 1984. "The Persistence of Volatility and Stock Market Fluctuations," Working papers 353, Massachusetts Institute of Technology (MIT), Department of Economics.
- Harvey, Andrew & Ruiz, Esther & Sentana, Enrique, 1992. "Unobserved component time series models with Arch disturbances," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 129-157.
- Burmeister, Edwin & McElroy, Marjorie B, 1988. " Joint Estimation of Factor Sensitivities and Risk Premia for the Arbitrage Pricing Theory," Journal of Finance, American Finance Association, vol. 43(3), pages 721-33, July.
- Pagan, Adrian & Ullah, Aman, 1988. "The Econometric Analysis of Models with Risk Terms," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(2), pages 87-105, April.
- Robert Jennrich, 1978. "Rotational equivalence of factor loading matrices with specified values," Psychometrika, Springer, vol. 43(3), pages 421-426, September.
- Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
- Gultekin, Mustafa N & Gultekin, N Bulent & Penati, Alessandro, 1989. " Capital Controls and International Capital Market Segmentation: The Evidence from the Japanese and American Stock Markets," Journal of Finance, American Finance Association, vol. 44(4), pages 849-69, September.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading lists or Wikipedia pages:
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.