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Inter-Regional Volatility Spillovers Between Emerging Capital Markets: Evidence From Turkey And Brazil

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Author Info

  • Murat Tasdemir

    (Eskisehir Osmangazi University)

  • Abdullah Yalama

    (University of Tasmania)

Abstract

This study investigates volatility spillovers between two stock markets, Turkish and Brazilian, located in different regions of the world. Using a misspecification robust causality-in-variance test, we found strong evidence supporting volatility spillovers from Istanbul Stock Exchange (ISE) to São Paulo Stock Exchange (BOVESPA). The results imply that financial crises may change the size and the direction of volatility spillovers between markets.

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File URL: http://www.tek.org.tr/dosyalar/Tasdemir&Yalama.pdf
File Function: Revised version, 2010
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Bibliographic Info

Paper provided by Turkish Economic Association in its series Working Papers with number 2010/8.

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Length: 21 pages
Date of creation: 2010
Date of revision: Jan 2010
Handle: RePEc:tek:wpaper:2010/8

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Related research

Keywords: Causalit-in-variance; volatility spiiovers; emerging markets; Turkey; Brazil;

References

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  1. Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, 04.
  2. Granger, C. W. J., 1980. "Testing for causality : A personal viewpoint," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 329-352, May.
  3. Francis X. Diebold & Kamil Yılmaz, 2007. "Measuring Financial Asset Return and Volatility Spillovers, With Application to Global Equity Markets," Koç University-TUSIAD Economic Research Forum Working Papers 0705, Koc University-TUSIAD Economic Research Forum.
  4. Vance L. Martin & Brenda Gonzalez-Hermosillo, & Mardi Dungey & Renee A. Fry, 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Australasian Meetings 243, Econometric Society.
  5. Van Rijckeghem, Caroline & Weder, Beatrice, 2003. "Spillovers through banking centers: a panel data analysis of bank flows," Journal of International Money and Finance, Elsevier, vol. 22(4), pages 483-509, August.
  6. Hong, Yongmiao, 2001. "A test for volatility spillover with application to exchange rates," Journal of Econometrics, Elsevier, vol. 103(1-2), pages 183-224, July.
  7. Vance L. Martin & Mardi Dungey, 2007. "Unravelling financial market linkages during crises," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 89-119.
  8. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  9. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
  10. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
  11. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
  12. Christian M. HAFNER & Helmut HERWARTZ, 2008. "Testing for Causality in Variance Usinf Multivariate GARCH Models," Annales d'Economie et de Statistique, ENSAE, issue 89, pages 215-241.
  13. Gaston Gelos & Alessandro Prati & Oya Celasun, 2003. "Would "Cold Turkey" Work in Turkey?," IMF Working Papers 03/49, International Monetary Fund.
  14. Cheung, Yin-Wong & Ng, Lilian K., 1996. "A causality-in-variance test and its application to financial market prices," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 33-48.
  15. Alper, C. Emre & Yilmaz, Kamil, 2004. "Volatility and contagion: evidence from the Istanbul stock exchange," Economic Systems, Elsevier, vol. 28(4), pages 353-367, December.
  16. Fujii, Eiji, 2005. "Intra and inter-regional causal linkages of emerging stock markets: evidence from Asia and Latin America in and out of crises," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(4), pages 315-342, October.
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