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Jump Interdependencies: Stochastic linkages among international stock markets

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  • Kshatriya, Saranya
  • Prasanna, Krishna

Abstract

This study investigates the volatily jump contagion among the Asian, European (Germany, UK, & France) and US markets. In particular, it examines the stochastic linkages among the international stock markets and analyzes the self and cross-excitation of jumps. The discontinuities in the stochastic volatility of each market are identified and their structural inter-dependencies are analyzed. Our empirical results imply that negative jumps from the USA and Europe are transmitted to the domestic Asian markets, while positive jumps are majorly from the regional markets. Results also imply that the cross-market linkages vary with respect to markets and regimes. Our results have implications for risk management, investment and hedging decisions.

Suggested Citation

  • Kshatriya, Saranya & Prasanna, Krishna, 2021. "Jump Interdependencies: Stochastic linkages among international stock markets," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:ecofin:v:57:y:2021:i:c:s1062940821000528
    DOI: 10.1016/j.najef.2021.101418
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    1. Yuan, Ying & Du, Xinyu, 2023. "Dynamic spillovers across global stock markets during the COVID-19 pandemic: Evidence from jumps and higher moments," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 628(C).

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    More about this item

    Keywords

    Jump Contagion; Self Excitation and Cross-Excitation; Stochastic Volatility; Wavelet Decomposition; Threshold Auto Regression;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G00 - Financial Economics - - General - - - General

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