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Volatility Spillovers and Contagion from Mature to Emerging Stock Markets

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  • John Beirne
  • Guglielmo Maria Caporale
  • Marianne Schulze-Ghattas
  • Nicola Spagnolo

Abstract

This paper examines volatility spillovers from mature to emerging stock markets and tests for changes in the transmission mechanism-contagion-during turbulences in mature markets. Tri-variate GARCH-BEKK models of returns in global (mature), regional, and local markets are estimated for 41 emerging market economies (EMEs), with a dummy capturing parameter shifts during turbulent episodes. LR tests suggest that mature markets influence conditional variances in many emerging markets. Moreover, spillover parameters change during turbulent episodes. Conditional variances in most EMEs rise during these episodes, but there is only limited evidence of shifts in conditional correlations between mature and emerging markets.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.96648.de/dp873.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 873.

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Length: 24 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwwpp:dp873

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Keywords: Volatility spillovers; contagion; stock markets; emerging markets;

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References

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Citations

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Cited by:
  1. Nathaniel Frank & Heiko Hesse, 2009. "Financial Spillovers to Emerging Markets during the Global Financial Crisis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(6), pages 507-521, December.
  2. John Beirne & Jana Gieck, 2012. "Interdependence and contagion in global asset markets," Working Paper Series 1480, European Central Bank.
  3. Rodrigo Alfaro A. & Rodrigo Cifuentes S., 2009. "Financial Stability, Monetary Policy and Central Banking: An Overview," Working Papers Central Bank of Chile 554, Central Bank of Chile.
  4. Bacchetta, Philippe & van Wincoop, Eric, 2013. "Sudden spikes in global risk," Journal of International Economics, Elsevier, vol. 89(2), pages 511-521.
  5. Jozef Barunik & Lukas Vacha & Ladislav Krištoufek, 2011. "Comovement of Central European stock markets using wavelet coherence: Evidence from high-frequency data," Working Papers IES 2011/22, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.
  6. John Beirne & Guglielmo Maria Caporale & Marianne Schulze-Ghattas & Nicola Spagnolo, 2009. "Global and Regional Spillovers in Emerging Stock Markets: A Multivariate GARCH-in-Mean Analysis," Discussion Papers of DIW Berlin 942, DIW Berlin, German Institute for Economic Research.
  7. Kenji Moriyama, 2010. "The Spillover Effects of the Global Crisis on Economic Activity in MENA Emerging Market Countries-An Analysis Using the Financial Stress Index," IMF Working Papers 10/8, International Monetary Fund.
  8. Elena Andreou & Maria Matsi & Andreas Savvides, 2013. "Stock and Foreign Exchange Market Linkages in Emerging Economies," University of Cyprus Working Papers in Economics 01-2013, University of Cyprus Department of Economics.

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