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Risk Contagion among International Stock Markets

Författare:
Publiceringsår: 2011
Språk: Engelska
Sidor: 22-38
Publikation/Tidskrift/Serie: Journal of International Money and Finance
Volym: 30
Nummer: 1
Dokumenttyp: Artikel i tidskrift
Förlag: Elsevier

Sammanfattning

Abstract in Undetermined

We develop a stochastic volatility model with jumps in returns and volatility to analyze the risk spillover from the U.S. market and the regional market to a number of European countries' equity markets. The key advantage of this approach compared to the earlier approaches is that it enables us to identify jumps and investigate spillover of extreme events across borders. We find that a large part of the jumps in the local markets are due to the U.S. market and the regional market. The U.S. contribution to the variances is in general below the contribution from the regional market. In general, we observe an increasing integration during the last two decades, which, to some extent, can be related to the advancement of the European Union. Furthermore, we show that the identification of the jumps can be used as a useful signal for portfolio reallocation.

Nyckelord

  • Economics
  • Spillover
  • Jump
  • Stochastic volatility
  • Wavelet
  • Markov Chain Monte Carlo
  • Integration

Övriga

Published
  • ISSN: 0261-5606

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