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Empirical investigation on the relationship between Japanese and Asian emerging equity markets

  • Ramaprasad Bhar
  • Shigeyuki Hamori

This study analyses the stock return characteristics for Japan and Asian emerging markets using monthly return to capture the changes in mean-variance in a two state framework. An unobserved Markov process drives the evolution of the states. The approach allows both the mean and the variance to depend on the unobserved states and the model is estimated in one step. The propensity of any market to stay in a particular state is inferred from the estimated model parameters. The study then extends the analysis by examining two statistical techniques i.e. the causality in variance by Cheung and Ng (1996) and the concordance measure developed by Harding and Pagan (1999).

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Article provided by Taylor and Francis Journals in its journal Applied Financial Economics Letters.

Volume (Year): 2 (2006)
Issue (Month): 2 (March)
Pages: 77-86

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Handle: RePEc:taf:apfelt:v:2:y:2006:i:2:p:77-86
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  1. repec:att:wimass:9520 is not listed on IDEAS
  2. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
  3. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, June.
  4. Schwert, G William, 1989. " Why Does Stock Market Volatility Change over Time?," Journal of Finance, American Finance Association, vol. 44(5), pages 1115-53, December.
  5. Hamilton, James D. & Susmel, Raul, 1994. "Autoregressive conditional heteroskedasticity and changes in regime," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 307-333.
  6. Turner, Christopher M. & Startz, Richard & Nelson, Charles R., 1989. "A Markov model of heteroskedasticity, risk, and learning in the stock market," Journal of Financial Economics, Elsevier, vol. 25(1), pages 3-22, November.
  7. C. John McDermott & Alasdair Scott, 2000. "Concordance in Business Cycles," IMF Working Papers 00/37, International Monetary Fund.
  8. Andrew Ang & Geert Bekaert, 1998. "Regime Switches in Interest Rates," NBER Working Papers 6508, National Bureau of Economic Research, Inc.
  9. Kim, Chang-Jin & Nelson, Charles R. & Startz, Richard, 1998. "Testing for mean reversion in heteroskedastic data based on Gibbs-sampling-augmented randomization1," Journal of Empirical Finance, Elsevier, vol. 5(2), pages 131-154, June.
  10. Cheung, Yin-Wong & Ng, Lilian K., 1996. "A causality-in-variance test and its application to financial market prices," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 33-48.
  11. Huntley Schaller & Simon Van Norden, 1997. "Regime switching in stock market returns," Applied Financial Economics, Taylor & Francis Journals, vol. 7(2), pages 177-191.
  12. Don Harding & Adrian Pagan, 1999. "Dissecting the Cycle," Melbourne Institute Working Paper Series wp1999n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
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