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Global and Regional Spillovers in Emerging Stock Markets: A Multivariate GARCH-in-Mean Analysis

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

Abstract

This paper examines global (mature market) and regional (emerging market) spillovers in local emerging stock markets. Tri-variate VAR GARCH(1,1)-in-mean models are estimated for 41 emerging market economies (EMEs) in Asia, Europe, Latin America, and the Middle East. The models capture a range of possible transmission channels: spillovers in mean returns, volatility, and cross-market GARCH-in-mean effects. Hypotheses about the importance of different channels are tested. The results suggest that spillovers from regional and global markets are present in the vast majority of EMEs. However, the nature of cross-market linkages varies across countries and regions. While spillovers in mean returns dominate in emerging Asia and Latin America, spillovers in variance appear to play a key role in emerging Europe. There is also some evidence of cross-market GARCH-in-mean effects. The relative importance of regional and global spillovers varies too, with global spillovers dominating in Asia, and regional spillovers in Latin America and the Middle East.

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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 942.

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Length: 14 p.
Date of creation: 2009
Date of revision:
Handle: RePEc:diw:diwwpp:dp942

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

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Citations

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Cited by:
  1. Jan Novotny, 2010. "Price Jumps in Visegrad Country Stock Markets: An Empirical Analysis," CERGE-EI Working Papers wp412, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  2. Gilles de Truchis & Benjamin Keddad, 2014. "Analyzing Financial Integration in East Asia through Fractional Cointegration in Volatilities," Working Papers, Department of Research, Ipag Business School 2014-382, Department of Research, Ipag Business School.
  3. Walid, Chkili & Chaker, Aloui & Masood, Omar & Fry, John, 2011. "Stock market volatility and exchange rates in emerging countries: A Markov-state switching approach," Emerging Markets Review, Elsevier, Elsevier, vol. 12(3), pages 272-292, September.
  4. Gilenko, Evgenii & Fedorova, Elena, 2014. "Internal and external spillover effects for the BRIC countries: Multivariate GARCH-in-mean approach," Research in International Business and Finance, Elsevier, Elsevier, vol. 31(C), pages 32-45.
  5. Erten, Irem & Tuncel, Murat B. & Okay, Nesrin, 2012. "Volatility Spillovers in Emerging Markets During the Global Financial Crisis: Diagonal BEKK Approach," MPRA Paper 56190, University Library of Munich, Germany.
  6. Fernanda G Barba & Paulo S Ceretta, 2011. "Risk transmission between Latin America stock markets and the US: impacts of the 2007/2008 Crisis," Economics Bulletin, AccessEcon, vol. 31(2), pages 1025-1037.
  7. Andreou, Elena & Matsi, Maria & Savvides, Andreas, 2013. "Stock and foreign exchange market linkages in emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 27(C), pages 248-268.
  8. Guidi, Francesco & Ugur, Mehmet, 2012. "Are South East Europe stock markets integrated with regional and global stock markets?," MPRA Paper 44133, University Library of Munich, Germany, revised Dec 2012.
  9. Abbas, Qaisar & Khan, Sabeen & Shah, Syed Zulfiqar Ali, 2013. "Volatility transmission in regional Asian stock markets," Emerging Markets Review, Elsevier, Elsevier, vol. 16(C), pages 66-77.

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