A multilateral approach to examining the comovements among major world equity markets

This study investigates the comovement in stock indices among major developed markets, where Morgan Stanley Capital International (MSCI) indices are employed for the purposes of the study. We employ a model that accommodates multilateral international impacts on equity index movements. The empirical results reveal the existence of significant international transmission effects among these major world markets, both in terms of returns and volatility, and mostly in a positive direction. The U.S. market, as expected, is the leading market in the sense that it has the most pervasive and significant impact on all markets across continents. However, the U.S. market exhibits a different relationship with European markets from that with Asia-Pacific markets. The evidence also suggests that strong regional transmission effects exist. A further investigation using the extended model reveals that the linkages between U.S. and European markets are driven by positive global common forces and by negative international competitive effects. On the other hand, the U.S. and Asian markets are linked through positive global common forces and positive international contagion effects. The United States, Canada, and the U.K. are the three markets that still demonstrate contagion influence over countries outside its own region. The Asia-Pacific markets are more susceptible to contagion effects. Finally, it is interesting to find that Japanese market performance became more contagious toward other markets during the Asian financial crisis period.     

The relationship between stock returns and volatility in international stock markets

This study examines the relationship between expected stock returns and volatility in the 12 largest international stock markets during January 1980 to December 2001. Consistent with most previous studies, we find a positive but insignificant relationship during the sample period for the majority of the markets based on parametric EGARCH-M models. However, using a flexible semiparametric specification of conditional variance, we find evidence of a significant negative relationship between expected returns and volatility in 6 out of the 12 markets. The results lend some support to the recent claim [Bekaert, G., Wu, G., 2000. Asymmetric volatility and risk in equity markets. Review of Financial Studies 13, 1–42; Whitelaw, R., 2000. Stock market risk and return: an empirical equilibrium approach. Review of Financial Studies 13, 521–547] that stock market returns are negatively correlated with stock market volatility.     

Liquidity operations during the financial crisis 2008/09: evidence from the relations between Korean won onshore and offshore markets

This paper addresses the interrelation of onshore and offshore markets before and after the Bank of Korea intervened in 2008/09. During the financial crisis, Korea faced a liquidity crunch and leveraged its high level of reserves to conduct swap agreements in late 2008. To analyse how the reforms affected the mean and volatility spillover in between the spot and NDF markets, an extended GARCH model is used. The main findings of this paper are that prior to the financial crisis, the spot market dominated the offshore market. This changed after South Korea addressed the won’s liquidity crunch at the height of the crisis. Mean and volatility spillover between the markets diminished and the price gap narrowed. In addition to the empirical results, the paper also underlines the significance of liquidity and robust capital requirements for central banks.     

Intraday bidirectional volatility spillover across international stock markets: does the global financial crisis matter?

This article studies volatility spillover between the US and the three largest European stock markets (Frankfurt, London and Paris) around the time of the recent Subprime crisis. In order to investigate the impact of the latter, we break our sample down into two sub-periods: a pre-crisis period and a post-crisis period, using a structural break test that has the advantage of endogenously testing for further breaks in the data. Unlike previous studies that have frequently investigated this issue using low frequency data, our article makes use of intraday data. Accordingly, using Threshold generalized autoregressive conditional heteroscedasticity (GARCH) model estimations, we find weak evidence of volatility transmission between the two regions before the Subprime crisis. However, during the post-crisis period, we record returns and volatility spillover from US to European markets and vice versa at different times of the trading day, indicating that the two regions became more dependent during the recent Subprime crisis, a finding that supports the contagion hypothesis between the US and European stock markets.     

An investigation of return and volatility linkages among equity markets: A study of selected European and emerging countries

This paper investigates the linkages among equity returns (based on exchange traded funds, ETF) and transmission of volatilities in the following countries: Germany, Austria, Poland, Russia and Turkey. Multivariate Autoregressive Moving Averages (MARMA) and the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) methodologies are utilized. The findings include the existence of significant co-movement of returns among countries in the sample. Also, Turkish and Russian markets were found to be more volatile than Austria, Germany and Poland. However, volatilities in Russia and Turkey do not persist very long. Finally, there is strong evidence of volatility spillovers. All of the countries in the sample, with the exception of Turkey, experience volatility spillovers from other markets. The presence of spillovers among return series and persistence of volatilities are useful to investors interested in diversifying their portfolios and to traders/fund managers who are interested in maximizing returns.     

Oil price shocks and volatility spillovers in the Nigerian sovereign bond market

This paper investigates volatility spillover in the Nigerian sovereign bond market arising from oil price shocks, using Vector Autoregressive Moving Average ‐ Asymmetric Generalized Autoregressive Conditional Heteroscedasticity (VARMA‐AGARCH) model. The paper covers the period March 22, 2011 to April 14, 2016 and makes use of the daily data of the Nigerian Sovereign Bond, Brent oil and West Texas Intermediate (WTI), respectively. We endogenously and sequentially detect structural break points using the test of Bai and Perron (2003) framework. In order to accurately estimate the model, we modify it by incorporating the break points into the VARMA‐AGARCH model, a process which if ignored would lead to model misspecification. The results obtained demonstrate a significant cross‐market volatility transmission between oil and sovereign bond market with ample sensitivity to structural breaks. The study also computes optimum weight portfolio and hedge ratio both with and without structural breaks and results equally indicate sensitivity to structural breaks.     

Revisiting the risk-return relation in the Chinese stock market: Decomposition of risk premium and volatility feedback effect

The empirical results of the risk-return relationship are mixed for both mature and merging markets. In this paper, we develop a new volatility model to revisit the risk-return relation of the aggregate stock market index by extending the Realized GARCH model of Hansen et al. (2012) with the Wang and Yang (2013) framework, in which the overall risk-return relation is decomposed into a risk premium and a volatility feedback effect. An empirical analysis of three major Chinese stock indices reveals positive risk premium and negative volatility feedback effect, and those findings are stable across different markets and sub-samples. However, their relative magnitudes differ between markets and varies through time.     

Islamic equity market integration and volatility spillover between emerging and US stock markets

The purpose of this paper is to study the conditional correlations across the US market and a sample of five Islamic emerging markets, namely Turkey, Indonesia, Pakistan, Qatar, and Malaysia. The empirical design uses MSCI (Morgan Stanley Capital International) Islamic equity index since it applies stringent restrictions to include companies. Indeed, two main restrictions must be met: (i) the business activity must be compliant with Shari’ah (i.e., Islamic law) guidelines and (ii) interest-bearing investments and leverage ratios should not exceed upper limits. Three models are used: multivariate GARCH BEKK, CCC, and DCC. The estimation results of the three models show that the US and Islamic emerging equity markets are weakly correlated over time. No sheer evidence supports that the US market spills over into the Islamic emerging equity markets. Besides interpreting the results in terms of weak market integration, the peculiar specificities of the Islamic finance industry and the admittance conditions to the MSCI Islamic equity index contribute to explaining them. Indeed, Islamic finance bans interest-bearing investments and imposes some rules, such as asset-backing, which has sizeable impacts on volatility spillover and shocks transmissions, alongside with the close linkage between real and financial sectors. These findings suggest that investors should take caution when investing in the Islamic emerging equity markets and diversifying their portfolios in order to minimize risk.     

The use of open source internet to analysis and predict stock market trading volume

The objective of this paper is to evaluate the impact of information demand and supply on stock market trading volume. Few studies have demonstrated the role of Google search data in analyzing trading volume activity. In this study, we employ a proxy for information demand which is derived from weekly internet search volume. The latest is from Google Trends database, for 25 of the largest stocks traded on CAC40 index, between April 2007 and March 2014. We use news headlines as a proxy for information supply. We use Garch model to analyze and predict trading volume.The empirical results present new evidences. First, information supply has an impact on trading volume but information demand's impact is much more important. Secondly, by applying MCA to results found, it could be concluded that the impact of public information on transaction volume is conditioned by two elements: the firm and market news disclosure and the second element relates to the characteristics of the market participants, more precisely their news interpretations and their risk aversion. Thirdly, we used Chow structural break test to verify the stability of our model. We found that for securities with structural changes, information demand is the responsible variable of the change in our model. Finally, we found that information variables have a predictive power on transaction volume.This paper contributes to existing literature by incorporating open source internet-based data into the analysis and prediction of transaction volume. Using internet information about the stock market, which has appeared recently as an interesting research for financial empiricists, computer scientists and practitioners, will have a very important utility because quantifying demand and supply of information becomes possible.     

The impact of FIFA’s official announcements on the stock market of Qatar: The case of the 2022 World Cup

This study examines the impact of the FIFA’s official announcements on Doha Stock Exchange (DSE) of Qatar with respect to the 2022 World Cup. Using the abnormal unsystematic volatility method of Hilliard and Savickas (2002), our empirical findings reveal that the DSE market is sensitive to FIFA’s announcements about the 2022 World Cup. We find that four out of six FIFA announcements act as primary drivers to the DSE market volatility. The significant reactions of the DSE market to these announcements unveil the investors’ sentiments about the fate of the governmental and private expenditures on medium- and long-term projects undertaken in anticipation of hosting the 2022 World Cup. The results have some implications to investors in this newly emerging market related to this global sporting event. Any future announcements, good or bad, are likely to impact share prices in DSE market and trigger portfolio reallocation by local and international investors, leading to increased volatility.