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Cross-correlations between volatility, volatility persistence and stock market integration: the case of emergent stock markets

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  • Todea, Alexandru

Abstract

In this paper, we investigate the dynamics of the two pairs of relationship, respectively volatility/market integration and volatility persistence/market integration, in the case of 20 emerging stock markets during the period 1999–2013. Employing the rolling windows approach we find that on most markets the persistent positive trend in volatility and volatility persistence is associated with the same trend in market integration. We use the detrending moving-average cross-correlation coefficients and we find positive cross-correlation that appears particularly in the long term and can only partly be attributed to the global financial crisis. The cross-section analysis shows that the markets which are more integrated display stronger volatility and volatility persistence, especially after 2005, when the level of market integration is higher. Our findings have several important implications for international portfolio management and security valuation.

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  • Todea, Alexandru, 2016. "Cross-correlations between volatility, volatility persistence and stock market integration: the case of emergent stock markets," Chaos, Solitons & Fractals, Elsevier, vol. 87(C), pages 208-215.
    • Handle: RePEc:eee:chsofr:v:87:y:2016:i:c:p:208-215
    DOI: 10.1016/j.chaos.2016.04.006
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    5. Wang, Yi & Sun, Qi & Zhang, Zilu & Chen, Liqing, 2022. "A risk measure of the stock market that is based on multifractality," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 596(C).
    6. Shen, Na & Chen, Jiayi, 2023. "Asymmetric multifractal spectrum distribution based on detrending moving average cross-correlation analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 615(C).
    7. Gil-Alana, Luis A. & Infante, Juan & Martín-Valmayor, Miguel Angel, 2023. "Persistence and long run co-movements across stock market prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 347-357.
    8. Ran Xiao, 2019. "Essays on Price Discovery and Volatility Dynamics in Emerging Market Currencies," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 5-2019.
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    More about this item

    Keywords

    Volatility persistence; Market integration; Detrended cross-correlations analysis; Global financial crisis; Emergent stock markets;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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