Volatility in Emerging Stock Markets

Posted: 26 Dec 1998 Last revised: 24 Feb 2012

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business ; European Corporate Governance Institute (ECGI)

Carla Inclan

Fannie Mae

Ricardo P. C. Leal

The COPPEAD Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 8, 2010

Abstract

This study examines what kinds of events cause large shifts in the volatility of emerging stock markets. We first determine when large changes in the volatility of emerging stock market returns occur and then examine global and local events (social, political, and economic) during the periods of increased volatility. An iterated cumulative sums of squares (ICSS) algorithm is used to identify the points of shocks/sudden changes in the variance of returns in each market and how long the shift lasts. Both increases and decreases in the variance are identified. We then identify events around the time period when shifts in volatility occur. Most events tend to be local and include the Mexican Peso crisis, periods of hyperinflation in Latin America, the Marcos-Aquino conflict in the Philippines, and the stock market scandal in India. The October 1987 crash is the only "global event" during the period 1985-1995 that caused a significant jump in the volatility of several emerging stock markets.

JEL Classification: G12, G14, O16

Suggested Citation

Aggarwal, Reena and Inclan, Carla and Leal, Ricardo Pereira Câmara, Volatility in Emerging Stock Markets (October 8, 2010). Journal of Financial and Quantitative Analysis March 1999, Available at SSRN: https://ssrn.com/abstract=142128

Reena Aggarwal (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Carla Inclan

Fannie Mae ( email )

3900 Wisconsin Ave
Washington, VA 20016
United States

Ricardo Pereira Câmara Leal

The COPPEAD Graduate School of Business ( email )

Rua Pascoal Lemme
355 - Cidade Universitária
Rio de Janeiro, Rio de Janeiro 21941-918
Brazil
39389871 (Phone)

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