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Implied volatility linkages between the U.S. and emerging equity markets: A note

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  • Dutta, Anupam

Abstract

This paper investigates stock market integration among the U.S. and two leading emerging markets—China and Brazil—using their implied volatility indexes published by the Chicago Board of Options Exchange (CBOE). Employing ARDL bound tests, we find strong evidence of long-run transmission of uncertainty from the U.S. market to other markets. Additionally, results from a bivariate VAR-GARCH model indicate high correlations among the equity markets, which may diminish the gains from portfolio diversification between the U.S. market and the emerging markets under study. Finally, the Toda-Yamamoto version of the Granger causality test also suggests significant links among the volatility indexes under study.

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  • Dutta, Anupam, 2018. "Implied volatility linkages between the U.S. and emerging equity markets: A note," Global Finance Journal, Elsevier, vol. 35(C), pages 138-146.
    • Handle: RePEc:eee:glofin:v:35:y:2018:i:c:p:138-146
    DOI: 10.1016/j.gfj.2017.09.002
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    Keywords

    VIX; ARDL bound tests; Emerging markets;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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