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On the Dynamic Interdependence of International Stock Markets: a Swiss Perspective

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Author Info

  • Isakov, D.
  • Perignon, C.

Abstract

This paper studies the links existing between the Swiss stock market and the five largest stock markets in the world (USA, Japan, United Kingdom, Germany and France) in terms of return and volatility. We find that conditional heteroskedasticity is present in every market and also that conditional volatility responds asymmetrically to past shocks. In order to properly take account of these phenomena we estimate a series of bivariate asymmetric AR(1)-GARCH(1,1) models to measure the links existing between the Swiss stock market and the five other stock markets. The results indicate that the US market has the strongest influence on the Swiss market in terms of returns and volatility. Links with other markets in terms of returns are relatively weak. The German and British markets strongly influence the volatility of the Swiss market. On the other hand, we find that the Swiss market has a statistically significant but economically weak influence on the foreign markets.

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Bibliographic Info

Paper provided by Ecole des Hautes Etudes Commerciales, Universite de Geneve- in its series Papers with number 99.1.

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Length: 17 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:ehecge:99.1

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Postal: Suisse; Ecole des Hautes Etudes Commerciales, Universite de Geneve, faculte des SES. 102 Bb. Carl-Vogt CH - 1211 Geneve 4, Suisse
Phone: (+ 41 22) 705-8263
Fax: (+ 41 22) 705-8293
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Web page: http://www.unige.ch/gsem/
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Keywords: STOCK MARKET ; INTERNATIONAL ECONOMY ; VOLATILITY;

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Cited by:
  1. Elena Corallo, 2007. "The effect of the war risk: a comparison of the consequences of the two Iraq wars," International Review of Economics, Springer, vol. 54(3), pages 371-382, September.
  2. Baur, Dirk & Jung, Robert C., 2006. "Return and volatility linkages between the US and the German stock market," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 598-613, June.
  3. Sheppard, Kevin & Cappiello, Lorenzo & Engle, Robert F., 2003. "Asymmetric dynamics in the correlations of global equity and bond returns," Working Paper Series 0204, European Central Bank.
  4. Frank Westermann, 2002. "Stochastic Trends and Cycles in National Stock Market Indices: Evidence from the U.S., the U.K. and Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(III), pages 317-328, September.

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