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The impact of trade intensity and Market characteristics on asymmetric volatility, spillovers and asymmetric spillovers: Evidence from the response of international stock markets to US shocks

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  • Newaz, Mohammad Khaleq
  • Park, Jin Suk

Abstract

This study examines the relationship between trade intensity and three stock market phenomena: asymmetric volatility, spillovers and asymmetric spillovers between the US and 74 international stock markets. The evidence is provided based on the cross-market models using the various measures from multivariate volatility models and the spillover indices. As stock trading gets more intensive, the market volatility responds proportionally stronger to a negative domestic shock than a positive one. Trade intensity also increases the spillovers of US shocks to the local markets. However, its impact diminishes at a higher level. Regarding other market characteristics, geographical distance, representing transaction costs or psychological /cultural obstacles, has a significant negative association with spillovers and the asymmetric spillovers. Less negative skewness, as stronger short-selling constraints, is associated with weaker spillovers. More volatile markets are generally linked to stronger asymmetries and spillovers.

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  • Newaz, Mohammad Khaleq & Park, Jin Suk, 2019. "The impact of trade intensity and Market characteristics on asymmetric volatility, spillovers and asymmetric spillovers: Evidence from the response of international stock markets to US shocks," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 79-94.
  • Handle: RePEc:eee:quaeco:v:71:y:2019:i:c:p:79-94
    DOI: 10.1016/j.qref.2018.07.007
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    Keywords

    Asymmetric volatility; Asymmetric spillovers; Spillovers; Trade intensity;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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