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Volatility spillovers and contagion: an empirical analysis of structural changes in emerging market volatility

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  • Aymen Ben Rejeb

    () (Faculty of Economics and Management of Mahdia, University of Monastir, Tunisia)

Abstract

This paper aims to test the international transmission of stock market volatility and the risk of contagion among a sample of emerging and developed markets through a methodology rarely used in this context. This methodology, developed by Bai and Perron (1998, 2003), is based on the determination of structural breakpoints. Our empirical strategy consists in identifying similarities in the dates of structural breaks and in comparing them with the occurrence dates of financial crises in order to test respectively the international transmission of volatility and the risk of contagion. Empirical results lead to very interesting conclusions. First, we find that the transmission of volatility is effective between the emerging markets and between them and the developed ones. Second, we show that the geographical proximity has a crucial effect in the transmission of volatility. Finally, a comparison between the occurrence dates of financial crises and the different structural breakpoint dates allows us to notice that there is an important analogy between them. This proves that the financial shocks are transmitted from one market to another during the periods of crises.

Suggested Citation

  • Aymen Ben Rejeb, 2013. "Volatility spillovers and contagion: an empirical analysis of structural changes in emerging market volatility," Economics Bulletin, AccessEcon, vol. 33(1), pages 56-71.
  • Handle: RePEc:ebl:ecbull:eb-12-00821
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    Cited by:

    1. Ben Rejeb, Aymen & Arfaoui, Mongi, 2016. "Financial market interdependencies: A quantile regression analysis of volatility spillover," Research in International Business and Finance, Elsevier, vol. 36(C), pages 140-157.

    More about this item

    Keywords

    G01; G15; C58;

    JEL classification:

    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets

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