The Causes of Volatility in a Small Internationally Integrated Stock Market: Ireland, July 1975 - June 1994
28 Pages Posted: 6 Jan 2011
Date Written: June 30, 1997
We examine the causes of conditional volatility in a small, internationally integrated stock market using the Irish stock market as an example. We relate Irish stock market conditional volatility to the conditional volatility of the British stock market and business cycle variables from July 1975 to May 1994. Exchange rate volatility is found to be a more significant determinant of volatility in a small internationally integrated stock market than is interest rate volatility. It follows that a potential benefit of membership of the European monetary system may be reduced stock market volatility in the smaller member countries.
Keywords: conditional volatility, Ireland, stock market integration, cointegration
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