Volatility Spillovers and Contagion from Mature to Emerging Stock Markets

Beirne, John; Caporale, Guglielmo Maria; Schulze-Ghattas, Marianne; Spagnolo, Nicola

Volatility Spillovers and Contagion from Mature to Emerging Stock Markets

42 Pages Posted: 18 Dec 2008

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Marianne Schulze-Ghattas

International Monetary Fund (IMF)

Nicola Spagnolo

Brunel University London - Economics and Finance

There are 4 versions of this paper

Date Written: December 2008

Abstract

This paper examines volatility spillovers from mature to emerging stock markets and tests for changes in the transmission mechanism-contagion-during turbulences in mature markets. Tri-variate GARCH-BEKK models of returns in global (mature), regional, and local markets are estimated for 41 emerging market economies (EMEs), with a dummy capturing parameter shifts during turbulent episodes. LR tests suggest that mature markets influence conditional variances in many emerging markets. Moreover, spillover parameters change during turbulent episodes. Conditional variances in most EMEs rise during these episodes, but there is only limited evidence of shifts in conditional correlations between mature and emerging markets.

Keywords: Working Paper

Suggested Citation: Suggested Citation

Beirne, John and Caporale, Guglielmo Maria and Schulze-Ghattas, Marianne and Spagnolo, Nicola, Volatility Spillovers and Contagion from Mature to Emerging Stock Markets (December 2008). IMF Working Papers, Vol. , pp. 1-40, 2008. Available at SSRN: https://ssrn.com/abstract=1316754