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The Effects Of Volatility And Changes In Conditional Correlations In The Stock Markets Of Russia And Developed Countries

Author

Listed:
  • Oleg N. Salmanov
  • Natalia V. Babina
  • Marina V. Samoshkina
  • Irina P. Drachena
  • Irina P. Salmanova

Abstract

The aim of this article is to identify patterns of profitability volatil-ity and to establish the degree of dynamic conditional correlation between the stock markets of developed countries and those of Russia. This issue is important for in-vestment strategies and the international diversification of investments. We use the BEKK-GARCH, CCC-GARCH, and DCC-GARCH models and show that the corre-lation between the Russian stock market and the markets of the USA, UK, Germany, and France has decreased significantly in recent years. We find that while the corre-lation between the Russian market and the mature European markets is bidirectional, the relationship between the US market and the Russian market is unidirectional. An assessment of the transfer of volatil-ity from all of the mature markets to the Russian market establishes its statistical significance and shows that feedback from the Russian market to the UK and German markets is insignificant. Diversification of international portfolios in the Russian market is recommended.

Suggested Citation

  • Oleg N. Salmanov & Natalia V. Babina & Marina V. Samoshkina & Irina P. Drachena & Irina P. Salmanova, 2020. "The Effects Of Volatility And Changes In Conditional Correlations In The Stock Markets Of Russia And Developed Countries," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(227), pages 67-94, October –.
    • Handle: RePEc:beo:journl:v:65:y:2020:i:227:p:67-94
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    References listed on IDEAS

    as
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    5. Sudharshan Reddy Paramati & Rakesh Gupta & Kishore Tandon, 2016. "Dynamic analysis of time-varying correlations and cointegration relationship between Australia and frontier equity markets," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 8(2), pages 121-145.
    6. Kocaarslan, Baris & Sari, Ramazan & Gormus, Alper & Soytas, Ugur, 2017. "Dynamic correlations between BRIC and U.S. stock markets: The asymmetric impact of volatility expectations in oil, gold and financial markets," Journal of Commodity Markets, Elsevier, vol. 7(C), pages 41-56.
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    More about this item

    Keywords

    volatility; correlation; BEKK-GARCH (1; 1) model; DCC-GARCH model; CCC-GARCH model; Russia; devel-oped markets;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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