Volatility Spillovers and Contagion from Mature to Emerging Stock Markets

CESifo Working Paper Series No. 2545

DIW Berlin Discussion Paper No. 873

26 Pages Posted: 11 Feb 2009

See all articles by John Beirne

John Beirne

European Central Bank (ECB)

Guglielmo Maria Caporale

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) - Policy Development and Review Department

Nicola Spagnolo

Brunel University London - Economics and Finance

Multiple version iconThere are 4 versions of this paper

Date Written: February 1, 2009

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: volatility spillovers, contagion, stock markets, emerging markets

JEL Classification: F30, G15

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 (February 1, 2009). CESifo Working Paper Series No. 2545. Available at SSRN: https://ssrn.com/abstract=1340401 or http://dx.doi.org/10.2139/ssrn.1340401

John Beirne

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

Kingston Lane
Marie Jahoda Building
Uxbridge, Middlesex UB8 3PH
United Kingdom
+44 1895 266713 (Phone)
+44 1895 269770 (Fax)

HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Marianne Schulze-Ghattas

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States

Nicola Spagnolo

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom

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