Do Bulls and Bears Move Across Borders? International Transmission of Stock Returns and Volatility

Lin, Wen-Ling; Engle, Robert F.; Ito, Takatoshi

doi:10.1093/rfs/7.3.507

Cited by 755 publications

(449 citation statements)

References 31 publications

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“…Their study showed price movements in the U.S. stock market greatly impacted the next day performance of the Japanese stock market; however, the Japanese equity market only had a small influence on the U.S. market. Previous studies conducted by Odier and Solnik (1993), Lin, Engle, andIto (1994), andCampbell, Koedijk, andKofman (2002) also showed evidence that markets are correlated at the international level and especially vulnerable to U.S. market declines. Our finding supports their work but also helps explain the unilateral relationship in the influence (only U.S. to Japan) between the two countries.…”

Section: Introductionmentioning

confidence: 86%

Asymmetric Threshold Linkages of inter-Sector Activity in International Equity Markets

Ahn¹,

Lee²

2011

IJEF

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The inter-sector study shows index performance on a sector-by-sector basis was heavily impacted by the country which closed just prior to its own market's open as we expect from the broad index. This study also found the influence of a country's lagged price movements on its own market varied from one country to another and from sector-to-sector. The investigation into industry specific indexes by applying the Multivariate Adaptive Regression Spline (MARS) model allowed us to untangle the data and capture the asymmetric dynamics in international financial markets. The sector specific study results revealed the strong linkages when markets were excessively volatile and also identified the difference between the impact of positive and negative extreme price movements.

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Section: Introductionmentioning

confidence: 86%

Asymmetric Threshold Linkages of inter-Sector Activity in International Equity Markets

Ahn¹,

Lee²

2011

IJEF

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“…A significant number of studies examined the spillovers effect among markets and provided a new perspective on the degree of such transmission. In this regard, studies that examine the spillover of volatility among developed markets (Hamao et al, 1990;Bae & Karolyi, 1994;Karolyi, 1995;Susmel & Engle, 1994;Koutmos & Booth, 1995;Lin et al, 1994;Kanas, 1998) and in the emerging and frontier markets (Choudhry, 1996;Bekaert & Harvey, 1997;Scheicher, 2001;Malik & Hammoudeh, 2007;Hammoudeh & Li, 2008;Li & Majerowska, 2008;Beirne et al, 2010;Gilenko & Fedorova, 2014) provides important insight in the explanation of volatility transmission across markets. Ng (2000) explore the spillover dissemination between US, Japan and various Pacific-Basin markets, and find evidence of volatility spillover from US and Japan to various Pacific-Basin markets.…”

Section: Related Literaturementioning

confidence: 99%

“…A number of studies employ generalized autoregressive conditional heteroscedastic (GARCH) models to explore whether news and shocks originate from the rest of the world may influence local emerging markets (Lin, Engle, & Ito, 1994;Choudhry, 1996;Bekaert & Harvey, 1997;Kanas, 1998;Ng, 2000;Baele, 2005;Chiang, Chen, & Lin, 2013). R. F. Engle, Ito, and Lin (1990) and Hamao, Masulis, and Ng (1990) are among the prior studies to use univariate GARCH model to analyze the volatility spillover effect.…”

Section: Introductionmentioning

confidence: 99%

Time-varying Return and Volatility Spillover among EAGLEs Stock Markets: A Multivariate GARCH Analysis

Umer¹,

Coşkun²,

Kiracı³

2018

j.financ.econ.res

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This study investigates the presence of return and volatility spillover across EAGLEs stock markets, namely China, India, Indonesia, Russia, Brazil, Turkey and Mexico. A multivariate GARCH DCC and BEKK frameworks are employed by classifying the total sample (i.e. from January 2002 to February 2017) into three sub-periods according to the 2008 Global financial crisis. The result shows a significant and positive spillover effect among stock markets in the pre-crisis and post-crisis periods. The transmission of spillover from external markets intensely influenced by US stock market. Furthermore, strong inter-connection and channel of spread observed among EAGLEs stock market during the post-crisis period.

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“…Since the seminal work of Grubel (1968) on the benefits of international portfolio diversification (see also, Levy and Sarnat (1979) and Agmon (1972)), this topic has received special attention in international finance. In fact, a growing body of literature has emerged more recently on studying comovements of international stock market returns (see, King et al (1994), Lin et al (1994), Longin and Solnik (2001), Karolyi and Stulz (1996), Forbes and Rigobon (2002), Brooks and Del Negro (2006), Okimoto (2008), among others). In particular, many of these studies present empirical evidence suggesting an asymmetric pattern in comovements of international stock market returns, in the sense that stock returns show stronger comovements when they go down than when they go up.…”

Section: Introductionmentioning

confidence: 99%

Identifying Asymmetric Comovements of International Stock Market Returns

2013

Journal of Financial Econometrics

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Based on a new approach for measuring the comovements between stock market returns, we provide a nonparametric test for asymmetric comovements in the sense that stock market downturns will lead to stronger comovements than market upturns. The test is used to detect whether asymmetric comovements exist in international stock markets. We find the following empirical facts. First, asymmetric comovements exist between the United States (U.S.) stock market and the stock markets for Canada, France, Germany, and the United Kingdom (U.K.), but the data are unable to reject the null hypothesis of the symmetric comovements between the U.S. and Japanese stock markets. Second, either a larger negative drop or a positive increase in stock prices leads to stronger comovements of stock market returns, indicating that comovements in the data are different from comovements implied by a bivariate symmetric distribution, which implies that comovements tend to zero as the market returns become more positive or more negative. JEL classification: G150, G19, F210, C490 Bank classification: Financial stability; Financial system regulation and policies; International topics; Econometric and statistical methods RésuméProposant une nouvelle approche en matière de mesure des covariations entre les rendements boursiers, l'auteur applique un test non paramétrique en vue d'établir si les covariations entre les marchés boursiers internationaux sont asymétriques, en l'occurrence, plus prononcées en phase de baisse qu'en phase de hausse des marchés. Il fait les constats empiriques suivants. D'abord, il existe des covariations asymétriques entre le marché boursier des États-Unis et ceux du Canada, de la France, de l'Allemagne et du Royaume-Uni, mais les données ne permettent pas de rejeter l'hypothèse nulle de symétrie des covariations entre le marché boursier des États-Unis et celui du Japon. Ensuite, plus la diminution ou la montée des cours boursiers est importante, plus les covariations entre les rendements boursiers sont fortes. Ce résultat est contraire à celui qu'implique une distribution symétrique bivariée, à savoir que les covariations tendent vers zéro lorsque les rendements boursiers deviennent très positifs ou très négatifs.

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Do Bulls and Bears Move Across Borders? International Transmission of Stock Returns and Volatility

Cited by 755 publications

References 31 publications

Asymmetric Threshold Linkages of inter-Sector Activity in International Equity Markets

Asymmetric Threshold Linkages of inter-Sector Activity in International Equity Markets

Time-varying Return and Volatility Spillover among EAGLEs Stock Markets: A Multivariate GARCH Analysis

Identifying Asymmetric Comovements of International Stock Market Returns

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