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Stock and Foreign Exchange Market Linkages in Emerging Economies

Elena Andreou, Maria Matsi and Andreas Savvides

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: This paper investigates bi-directional linkages between the stock and foreign exchange markets of a number of emerging economies. A quarto-variate VAR-GARCH model with the BEKK representation is estimated for each of twelve emerging economies to test for spillovers, both in terms of return and volatility, between the emerging stock market, foreign exchange market and global and regional stock markets. We find significant bi-directional spillovers between stock and foreign exchange markets. We also examine the effects of a country’s choice of exchange rate regime, on the one hand, and the Asian financial crisis, on the other, on the volatility spillover mechanism.

Keywords: Volatility Spillovers; MGARCH; Emerging Economies (search for similar items in EconPapers)
Pages: 41 pages
Date: 2013-01
New Economics Papers: this item is included in nep-fmk, nep-ifn and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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