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Volatility and Information Linkages Across Markets and Countries

Author

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  • Petra Fleischer

    (School of Finance and Applied Statistics, Australian National University, Canberra ACT 0200.)

Abstract

This study examines information and volatility linkages across the equity, money and bond markets within Australia and the US and across the two countries. These volatility linkages are due to common information and information spillovers caused by cross-market hedging. We employ a rational expectations framework in which information arrives randomly, causing volatility to be stochastic. The model imposes restrictions on the moments of returns which we estimate using GMM. We find that the model fits extremely well. The parameters are very stable across the various bivariate specifications. Cross-market linkages estimated using GMM are much stronger than those found with the commonly used proxies for volatility.

Suggested Citation

  • Petra Fleischer, 2003. "Volatility and Information Linkages Across Markets and Countries," Australian Journal of Management, Australian School of Business, vol. 28(3), pages 251-272, December.
    • Handle: RePEc:sae:ausman:v:28:y:2003:i:3:p:251-272
    DOI: 10.1177/031289620302800302
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    References listed on IDEAS

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