Inter-regional and region-specific transmission of international stock market returns: The role of foreign information
AbstractThis paper uses stochastic-parameter regressions to analyze the role of foreign information on the return equivalent of the heat wave and meteor shower hypotheses of Engle etal. [Engle, R.F., Ito, T., Lin, W., 1990 Meteor showers or heat waves? Heteroscedastic intra-daily volatility in the foreign exchange market. Econometrica 59, 525-542]. The impact of foreign information on the level and intensity of signal transmission within and between international stock markets is assessed. It is found that signals are transmitted directly from some markets to others and indirectly through other markets. Transmission across regions is stronger than within regions, but most relationships vary over time. Foreign information plays an important role, and can be used profitably in out-of-sample trading, but some stock markets are immune to the effect of information from others.
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 Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 28 (2009)
Issue (Month): 2 (March)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443
International stock markets Return predictability Information transmission Time-varying regressions Kalman filter;
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.:
- Lin, Wen-Ling & Engle, Robert F & Ito, Takatoshi, 1994. "Do Bulls and Bears Move across Borders? International Transmission of Stock Returns and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 7(3), pages 507-38.
- 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.
- Harvey, A. C. & Ruiz, Esther & Sentana, E., 1992. "Unobserved Component Time Series Models with ARCH Disturbances," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/4702, Universidad Carlos III de Madrid.
- Kate Adjaoute & Martin Bruand & Rajna Gibson-Asner, 1998. "On the Predictability of the Stock Market Volatility: Does History Matter?," European Financial Management, European Financial Management Association, vol. 4(3), pages 293-319.
- Geert Bekaert & Campbell R. Harvey, 1997.
"Emerging Equity Market Volatility,"
NBER Working Papers
5307, National Bureau of Economic Research, Inc.
- Hamao, Yasushi & Masulis, Ronald W & Ng, Victor, 1990. "Correlations in Price Changes and Volatility across International Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 281-307.
- Pagan, A.R. & Schwert, G.W., 1989.
"Alternative Models For Conditional Stock Volatility,"
89-02, Rochester, Business - General.
- Pagan, Adrian R. & Schwert, G. William, 1990. "Alternative models for conditional stock volatility," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 267-290.
- Adrian R. Pagan & G. William Schwert, 1990. "Alternative Models For Conditional Stock Volatility," NBER Working Papers 2955, National Bureau of Economic Research, Inc.
- Geert Bekaert & Campbell R. Harvey, 1997.
"Foreign Speculators and Emerging Equity Markets,"
William Davidson Institute Working Papers Series
79, William Davidson Institute at the University of Michigan.
- King, Mervyn A & Wadhwani, Sushil, 1990.
"Transmission of Volatility between Stock Markets,"
Review of Financial Studies,
Society for Financial Studies, vol. 3(1), pages 5-33.
- Stoll, Hans R & Whaley, Robert E, 1990. "Stock Market Structure and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 37-71.
- Ito, Takatoshi & Engle, Robert F. & Lin, Wen-Ling, 1992.
"Where does the meteor shower come from? : The role of stochastic policy coordination,"
Journal of International Economics,
Elsevier, vol. 32(3-4), pages 221-240, May.
- Takatoshi Ito & Robert F. Engle & Wen-Ling Lin, 1992. "Where Does the Meteor Shower Come From? The Role of Stochastic Policy Coordination," NBER Working Papers 3504, National Bureau of Economic Research, Inc.
- Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
- Granger, Clive W.J. & Machina, Mark J., 2006. "Structural attribution of observed volatility clustering," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 15-29.
- Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005.
"Market Integration and Contagion,"
The Journal of Business,
University of Chicago Press, vol. 78(1), pages 39-70, January.
- Reyes, Mario G., 1999. "Size, time-varying beta, and conditional heteroscedasticity in UK stock returns," Review of Financial Economics, Elsevier, vol. 8(1), pages 1-10, June.
- Eun, Cheol S. & Shim, Sangdal, 1989. "International Transmission of Stock Market Movements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(02), pages 241-256, June.
- Climent, Francisco & Meneu, Vicente, 2003.
"Has 1997 Asian crisis increased information flows between international markets,"
International Review of Economics & Finance,
Elsevier, vol. 12(1), pages 111-143.
- Francisco J. Climent & Vicente Meneu, . "Has 1997 Asian Crisis Increased Information Flows Between International Markets?," Working Papers on International Economics and Finance 01-01, FEDEA.
- Francisco J. Climent & Vicente Meneu, 2001. "Has 1997 Asian Crisis increased Information Flows between International Markets?," Working Papers 01-01, Asociación Española de Economía y Finanzas Internacionales.
- Michael Melvin & Bettina Peiers Melvin, 2003. "The Global Transmission of Volatility in the Foreign Exchange Market," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 670-679, August.
- François Longin, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, 04.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).
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.