Modelling Return and Volatility Exposures in Global Stock Markets

Abstract

This article empirically investigates the exposure of country-level conditional stock return volatilities to conditional global stock return volatility. It extends the results found in the "volatility spillover" literature by providing evidence that conditional stock market return volatilities have a contemporaneous and systematic exposure to global return volatilities. Whereas all the countries included in the study exhibited significant and positive systematic exposures to global volatility, emerging market volatility exposures were considerably higher than developed market exposures.

Keywords: Volatility Exposures, Volatility Spillovers, Risk Management, Asymmetric GARCH

JEL Classification: G10, G12, G14