Title: Volatility Transmission Across Equity Markets: Did the Relationships Hold During the Global Financial Crisis?
Abstract: Previous research has proven that large financial markets can be prime determinants of volatility in smaller markets. This paper seeks to examine in a broader sense the linkages between developed and emerging financial markets. More specifically, we examine the relationship between two greatest emerging markets of Eastern Europe, Russia and Poland and their role in transmitting financial volatility. Utilizing bivariate DCC- GARCH modeling, we estimate volatility spillover effects and dynamic conditional correlation between equity markets in South and North America, the US and European markets. Our results show that the US market (S&P500 index) is the main volatility transmitter worldwide, whereas the UK, German and French markets are the sources of volatility for the European developed and emerging European equity markets. However, the German DAX index, contrary to some studies, cannot be considered as dominant in the European region, in spite of the leadership of the German economy. According to the results of our study the role of volatility transmitter belongs to the UK stock market. More importantly, we find that the influence of Russian market volatility exceeds the influence of Poland in the Eastern and Northern European regions, closely tracking their levels of market capitalization.
Publication Year: 2014
Publication Date: 2014-01-01
Language: en
Type: article
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