Volatility in Emerging Stock Markets

31 Pages Posted: 9 Oct 2010

See all articles by Reena Aggarwal

Reena Aggarwal

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

Carla Inclan

Georgetown University - Robert Emmett McDonough School of Business

Ricardo P. C. Leal

The COPPEAD Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 1997

Abstract

This study examines the daily, weekly, and monthly behavior of volatility in emerging stock markets in local currency and in dollar-adjusted returns. An iterated cumulative sums of squares methodology is used to identify the points and magnitude of shocks/sudden changes in the unconditional variance of returns in each market. Both increases and decreases in the variance are identified. The high volatility in emerging markets is not simply continuous, but is marked by shocks. The large changes in volatility seem to be related to important country-specific political, social and economic events. These events 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” in the last decade that caused a significant jump in the volatility of several emerging stock markets. After accounting for these shocks, ARCH/GARCH effects are considerably reduced.

Suggested Citation

Aggarwal, Reena and Inclan, Carla and Leal, Ricardo Pereira Câmara, Volatility in Emerging Stock Markets (July 1, 1997). Available at SSRN: https://ssrn.com/abstract=1689711 or http://dx.doi.org/10.2139/ssrn.1689711

Reena Aggarwal (Contact Author)

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

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Carla Inclan

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

3700 O Street, NW
Washington, DC 20057
United States

Ricardo Pereira Câmara Leal

The COPPEAD Graduate School of Business ( email )

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

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