Regime Shifts and Volatility Spillovers on International Stock Markets
AbstractA standard capital asset pricing model is extended to allow for stochastic shifts in the volatility of the news process. This model is then estimated on bivariate stock market data to separate two exogenous news processes â a world and a domestic. The results indicate that the influence of the world news process on the Swedish stock market has increased significantly over the period 1970-1995. I also find that the foreign influence is much stronger when the volatility of the world news process is high. Furthermore, when the world state shifts to high risk, the Swedish stock market immediately reacts by a large fall, estimated to 7.0%. The bivariate model is also estimated on a set of other national stock markets.
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Bibliographic InfoPaper provided by Stockholm - International Economic Studies in its series Papers with number 603.
Length: 20 pages
Date of creation: 1995
Date of revision:
Contact details of provider:
Postal: UNIVERSITY OF STOCKHOLM, INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES, S- 106 91 STOCKHOLM SWEDEN.
Web page: http://www.iies.su.se/
More information through EDIRC
STOCK MARKET; EXTERNALITIES; INTERNATIONAL FINANCE; FINANCIAL MARKET ; SWEDEN;
Other versions of this item:
- Hassler., John, 1997. "Regime Shifts and Volatility Spillovers on International Stock Markets," Seminar Papers 603, Stockholm University, Institute for International Economic Studies.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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