Return and Volatility Linkages among G-7 and Selected Emerging Markets
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Authors
Bhuyan, Rafiqul
Elian, Mohammad
Bagnied, Mohsen
Al-Deehani, Talla Mohammed
Issue Date
2015
Type
Journal Article
Peer-Reviewed
Peer-Reviewed
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Abstract
In this research, using twelve year daily data on sixteen market indicies, we examine the return and volatility
linkages among developed and selected emerging stock markets. All markets exhibit excess kurtosis and ARCH
effect in addition to non-normality. Our results show the existence of non-normality, excess kurtosis and excess
volatility (ARCH effect) in all markets. There is also a positive pair-wise correlation among these markets.
Interesting observation is that the daily volatility of Indonesia, among all markets including G-7 markets, is
observed to be the smallest and there is negative correlation between Hong Kong and China Markets during the
sample period. We find that these markets are highly linked except for Italy. Further to our analysis, we observe
that except for China, all these markets also exhibit leverage effects. We also observe the asymmetry in volatility
in all markets, except for China. Volatility transmission among equity markets in the same continent have the most
influence for the stock markets in that area, except for UK market that has links to the USA stock markets. Results
also indicate portfolio mix for investors of any country is different from another country.
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Volume
7
Issue
6