Global and Regional Spillovers in Emerging Stock Markets: A Multivariate Garch-in-Mean Analysis

20 Pages Posted: 5 Oct 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)

Nicola Spagnolo

Brunel University London - Economics and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: September 2009

Abstract

This paper examines global (mature market) and regional (emerging market) spillovers in local emerging stock markets. Tri-variate VAR GARCH(1,1)-in-mean models are estimated for 41 emerging market economies (EMEs) in Asia, Europe, Latin America, and the Middle East. The models capture a range of possible transmission channels: Spillovers in mean returns, volatility, and cross-market GARCH-in-mean effects. Hypotheses about the importance of different channels are tested. The results suggest that spillovers from regional and global markets are present in the vast majority of EMEs. However, the nature of crossmarket linkages varies across countries and regions. While spillovers in mean returns dominate in emerging Asia and Latin America, spillovers in variance appear to play a key role in emerging Europe. There is also some evidence of cross-market GARCH-in-mean effects. The relative importance of regional and global spillovers varies too, with global spillovers dominating in Asia, and regional spillovers in Latin America and the Middle East.

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, Global and Regional Spillovers in Emerging Stock Markets: A Multivariate Garch-in-Mean Analysis (September 2009). CESifo Working Paper Series No. 2794. Available at SSRN: https://ssrn.com/abstract=1481129

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) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Nicola Spagnolo

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom

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