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Market volatility across countries – evidence from international markets

  • Sabur Mollah
  • Asma Mobarek
Registered author(s):

    Purpose – The purpose of this paper is to investigate the time-varying risk return relationship and the persistence of shocks to volatility within GARCH framework both in developed and emerging markets. Design/methodology/approach – This paper uses nonlinear ARCH and GARCH-family models for testing the volatility both in developed and emerging markets. Findings – The findings of the paper suggest that there is a long-term persistence shock in emerging markets compared to developed markets. Research limitations/implications – The data set used for the developed and emerging markets is not consistent in terms of sample period. However, this paper explores the venues for further research on the global diversification. Practical implications – The implication of volatility measurement is vital in determining the cost of capital for investment and portfolio management, option pricing and for market regulations. Originality/value – The unique features of the paper include large sample size with updated data set that reveals the nature of world economy and empirical evidence on volatility testing that reports the risk return characteristics of both developed and emerging markets.

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    File URL: http://www.emeraldinsight.com/journals.htm?issn=1086-7376&volume=26&issue=4&articleid=1816903&show=abstract
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    Article provided by Emerald Group Publishing in its journal Studies in Economics and Finance.

    Volume (Year): 26 (2009)
    Issue (Month): 4 (October)
    Pages: 257-274

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    Handle: RePEc:eme:sefpps:v:26:y:2009:i:4:p:257-274
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    1. Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 33-55, March.
    2. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
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    7. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June.
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    10. Chaker Aloui, 2003. "Long-Range Dependence in Daily Volatility on Tunisian Stock Market," Working Papers 0340, Economic Research Forum, revised Dec 2003.
    11. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
    12. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, vol. 19(1), pages 3-29, September.
    13. Bekaert, Geert & Wu, Guojun, 2000. "Asymmetric Volatility and Risk in Equity Markets," Review of Financial Studies, Society for Financial Studies, vol. 13(1), pages 1-42.
    14. Jaeun Shin, 2005. "Stock Returns and Volatility in Emerging Stock Markets," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 4(1), pages 31-43, April.
    15. Baillie, Richard T. & DeGennaro, Ramon P., 1990. "Stock Returns and Volatility," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(02), pages 203-214, June.
    16. Jun Yu, 2002. "Forecasting volatility in the New Zealand stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 12(3), pages 193-202.
    17. Wu, Guojun, 2001. "The Determinants of Asymmetric Volatility," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 837-59.
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