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Price and Volatility Transmission across Borders

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  • Gagnon, Louis

    (Queen's U)

  • Karolyi, G. Andrew

    (Ohio State U)

Abstract

Over the past forty years, financial markets throughout the world have steadily become more open to foreign investors. With open markets, asset prices are determined globally. A vast literature on portfolio choice and asset pricing has evolved to study the importance of global factors as well as local factors as determinants of portfolio choice and of expected returns on risky assets. There is growing evidence that risk premia are increasingly determined globally. An important outcome of this force of globalization is increased comovement in asset prices across markets. This survey study examines the literature on the dynamics of comovements in asset prices and volatility across markets around the world. The literature began in the 1970s in conjunction with early theoretical developments on international asset pricing models, but it blossomed in the late 1980s and early 1990s with the availability of comprehensive international stock market databases and the development of econometric methodology to model these dynamics.

Suggested Citation

  • Gagnon, Louis & Karolyi, G. Andrew, 2006. "Price and Volatility Transmission across Borders," Working Paper Series 2006-5, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  • Handle: RePEc:ecl:ohidic:2006-5
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    File URL: http://www.cob.ohio-state.edu/fin/dice/papers/2006/2006-5.pdf
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    Cited by:

    1. Chan, Leo & Lien, Donald & Weng, Wenlong, 2008. "Financial interdependence between Hong Kong and the US: A band spectrum approach," International Review of Economics & Finance, Elsevier, vol. 17(4), pages 507-516, October.
    2. Felices, Guillermo & Grisse, Christian & Yang, Jing, 2009. "International financial transmission: emerging and mature markets," Bank of England working papers 373, Bank of England.
    3. Costas Siriopoulos & Athanasios Fassas, 2013. "Dynamic relations of uncertainty expectations: a conditional assessment of implied volatility indices," Review of Derivatives Research, Springer, vol. 16(3), pages 233-266, October.
    4. Sanjay Sehgal & Wasim Ahmad & Florent Deisting, 2015. "An investigation of price discovery and volatility spillovers in India’s foreign exchange market," Journal of Economic Studies, Emerald Group Publishing, vol. 42(2), pages 261-284, May.
    5. Nyberg, Henri & Pönkä, Harri, 2016. "International sign predictability of stock returns: The role of the United States," Economic Modelling, Elsevier, vol. 58(C), pages 323-338.
    6. repec:eee:finlet:v:23:y:2017:i:c:p:12-18 is not listed on IDEAS
    7. Amanjot Singh & Parneet Kaur, 2017. "A Short Note on Information Transmissions Across US-BRIC Equity Markets: Evidence from Volatility Spillover Index," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(1), pages 197-208, March.
    8. Irena Vodenska & Alexander P. Becker & Di Zhou & Dror Y. Kenett & H. Eugene Stanley & Shlomo Havlin, 2016. "Community Analysis of Global Financial Markets," Risks, MDPI, Open Access Journal, vol. 4(2), pages 1-15, May.
    9. John Cotter & Stuart Gabriel & Richard Roll, 2015. "Can Housing Risk Be Diversified? A Cautionary Tale from the Housing Boom and Bust," Review of Financial Studies, Society for Financial Studies, vol. 28(3), pages 913-936.
    10. Mahfuzul Haque & Imen Kouki, 2009. "Effect of 9/11 on the conditional time-varying equity risk premium: evidence from developed markets," Journal of Risk Finance, Emerald Group Publishing, vol. 10(3), pages 261-276, May.
    11. Sinha, Pankaj & Sinha, Gyanesh, 2010. "Volatility Spillover in India, USA and Japan Investigation of Recession Effects," MPRA Paper 21873, University Library of Munich, Germany.
    12. repec:bla:acctfi:v:57:y:2017:i:3:p:623-655 is not listed on IDEAS
    13. Nave, Juan M. & Ruiz, Javier, 2015. "Risk aversion and monetary policy in a global context," Journal of Financial Stability, Elsevier, vol. 20(C), pages 14-35.
    14. John Cotter & Stuart Gabriel & Richard Roll, 2016. "Nowhere to run, nowhere to hide: asset diversification in a flat world," Working Papers 201612, Geary Institute, University College Dublin.
    15. Chang Shu & Dong He & Jinyue Dong & Honglin Wang, 2016. "Regional pull vs global push factors: China and US influence on Asia-Pacific financial markets," BIS Working Papers 579, Bank for International Settlements.
    16. Jiang, George J. & Konstantinidi, Eirini & Skiadopoulos, George, 2012. "Volatility spillovers and the effect of news announcements," Journal of Banking & Finance, Elsevier, vol. 36(8), pages 2260-2273.
    17. Hong Miao & Sanjay Ramchander & Marc W. Simpson, 2011. "Return and Volatility Transmission in U.S. Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 39(4), pages 701-741, December.
    18. Bartosz Gębka & Dobromił Serwa, 2012. "Liquidity needs, private information, feedback trading: verifying motives to trade," NBP Working Papers 119, Narodowy Bank Polski, Economic Research Department.
    19. Vrugt, Evert B., 2009. "U.S. and Japanese macroeconomic news and stock market volatility in Asia-Pacific," Pacific-Basin Finance Journal, Elsevier, vol. 17(5), pages 611-627, November.
    20. Chau, Frankie & Deesomsak, Rataporn, 2014. "Does linkage fuel the fire? The transmission of financial stress across the markets," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 57-70.
    21. Boulis Ibrahim & Janusz Brzeszczynski, 2013. "Interdependence of Stock Markets Before and After the Global Financial Crisis of 2007," CFI Discussion Papers 1305, Centre for Finance and Investment, Heriot Watt University.
    22. Gębka, Bartosz & Serwa, Dobromił, 2015. "The elusive nature of motives to trade: Evidence from international stock markets," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 147-157.
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    25. Yarovaya, Larisa & Brzeszczyński, Janusz & Lau, Chi Keung Marco, 2016. "Intra- and inter-regional return and volatility spillovers across emerging and developed markets: Evidence from stock indices and stock index futures," International Review of Financial Analysis, Elsevier, vol. 43(C), pages 96-114.

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    JEL classification:

    • F30 - International Economics - - International Finance - - - General

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