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Time-Scale Decomposition of Price Transmission in International Markets

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  • VIVIANA FERNANDEZ

Abstract

This paper focuses on return spillovers in stock markets at different time scales using wavelet analysis. We look at eight stock indices that comprise the G7 countries, emerging Asia, Western Europe, Eastern Europe and the Middle East, the emerging Far East, Latin America, North America, and the Pacific region for the period 1990-2002. Our estimation results show evidence of price spillovers from the G7 countries to Europe, Eastern Europe and the Middle East, emerging Asia, Europe, Latin America, and North America. However, price spillovers from these regions to the G7 countries are weaker at different time scales. Similarly, we find price spillovers from North America to Latin America, emerging Asia, the emerging Far East, and the Pacific region, and from both Europe and Latin America to North America. Our results are robust to the existence of asymmetric generalized autoregressive conditional heteroskedasticity (GARCH) effects and serial correlation in returns. We believe that our findings are potentially relevant to portfolio risk management.

Suggested Citation

  • Viviana Fernandez, 2005. "Time-Scale Decomposition of Price Transmission in International Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(4), pages 57-90, August.
  • Handle: RePEc:mes:emfitr:v:41:y:2005:i:4:p:57-90
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    Cited by:

    1. Dewandaru, Ginanjar & Rizvi, Syed Aun R. & Masih, Rumi & Masih, Mansur & Alhabshi, Syed Othman, 2014. "Stock market co-movements: Islamic versus conventional equity indices with multi-timescales analysis," Economic Systems, Elsevier, vol. 38(4), pages 553-571.
    2. Jarno Kiviaho & Jussi Nikkinen & Vanja Piljak & Timo Rothovius, 2014. "The Co†movement Dynamics of European Frontier Stock Markets," European Financial Management, European Financial Management Association, vol. 20(3), pages 574-595, June.
    3. Dewandaru, Ginanjar & Masih, Rumi & Masih, A. Mansur M., 2015. "Why is no financial crisis a dress rehearsal for the next? Exploring contagious heterogeneities across major Asian stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 419(C), pages 241-259.
    4. el Alaoui, Abdelkader O. & Dewandaru, Ginanjar & Azhar Rosly, Saiful & Masih, Mansur, 2015. "Linkages and co-movement between international stock market returns: Case of Dow Jones Islamic Dubai Financial Market index," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 36(C), pages 53-70.
    5. Dewandaru, Ginanjar & Masih, Rumi & Masih, A. Mansur M., 2016. "What can wavelets unveil about the vulnerabilities of monetary integration? A tale of Eurozone stock markets," Economic Modelling, Elsevier, vol. 52(PB), pages 981-996.
    6. Rizvi, Syed Aun R. & Arshad, Shaista & Alam, Nafis, 2015. "Crises and contagion in Asia Pacific — Islamic v/s conventional markets," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 315-326.
    7. Reboredo, Juan C. & Rivera-Castro, Miguel A., 2014. "Wavelet-based evidence of the impact of oil prices on stock returns," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 145-176.
    8. Silvo Dajčman, 2013. "Interdependence Between Some Major European Stock Markets - A Wavelet Lead/Lag Analysis," Prague Economic Papers, University of Economics, Prague, vol. 2013(1), pages 28-49.
    9. Chakrabarty, Anindya & De, Anupam & Gunasekaran, Angappa & Dubey, Rameshwar, 2015. "Investment horizon heterogeneity and wavelet: Overview and further research directions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 429(C), pages 45-61.
    10. Tabak, Benjamin M. & de Castro Miranda, Rodrigo & da Silva Medeiros, Maurício, 2016. "Contagion in CDS, banking and equity markets," Economic Systems, Elsevier, vol. 40(1), pages 120-134.

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    Keywords

    A-PGARCH models; spillovers; wavelet analysis;

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