Global and regional spillovers in emerging stock markets: A multivariate GARCH-in-mean analysis

Abstract

___________________________________________________________________________ AbstractThis paper examines global (mature market) and regional (emerging market) spillovers in local emerging stock markets. Tri-variate VAR GARCH(1,1)-in-mean models are estimated for 41 emerging market economies (EMEs) in Asia, Europe, Latin America, and the Middle East. The models capture a range of possible transmission channels: spillovers in mean returns, volatility, and cross-market GARCH-in-mean effects. Hypotheses about the importance of different channels are tested. The results suggest that spillovers from regional and global markets are present in the vast majority of EMEs. However, the nature of crossmarket linkages varies across countries and regions. While spillovers in mean returns dominate in emerging Asia and Latin America, spillovers in variance appear to play a key role in emerging Europe. There is also some evidence of cross-market GARCH-in-mean effects. The relative importance of regional and global spillovers varies too, with global spillovers dominating in Asia, and regional spillovers in Latin America and the Middle East. JEL classifications: F30; G15

Return and volatility spillovers in equity markets: An investigation using various GARCH methodologies

“…Once again, these results are similar to findings of other studies (Abbas et al, 2013;Beirne et al, 2010;Frankel & Roubini, 2001;Yavas & Rezayat, 2016).…”

“…These results are corroborated by Beirne et al (2010) and Yavas and Dedi (2016) that find spillovers in variance (volatility) appear to play a role in Europe. Schleicher (2001), on the other hand, found return co-movements significant but not their volatilities in Hungary, Poland, and Czech Republic.…”

Volatility transmission and volatility impulse response functions among the Greater China stock markets

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“…The VIRF depends on the history through the volatility state ‫ܪ‬ at the time when the initial shock occurs whereas the traditional impulse response functions do not depend on the history of the process. 4. The decay or persistence of shocks is given by the moving average matrices Φ ௧ ൌ ሺܴ ‫ܨ‬ሻ ௧ିଵ ܴ, which is analogous to the traditional analysis.…”

Volatility spillover effect study in U.S. dollar and gold market based on bivariate-BEKK model

“…Trivariate GARCH (1, 1)-in-mean models for 41 emerging markets in Asia, Europe, Latin America, and the Middle East was estimated and the evidence of mean spillovers in emerging Asia and Latin America and spillovers in variance in emerging Europe. The cross-market GARCH-in-mean effects is detected [14]. Also, the level of integration of the BRIC equity markets (Brazil, Russia, India, China) with their respective regions and the world has studied [15].…”