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

Burhan F. Yavas and Lidija Dedi

Research in International Business and Finance, 2016, vol. 37, issue C, pages 583-596

Abstract: 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.

Keywords: Volatility transmission; Exchange traded funds; MARMA; GARCH (search for similar items in EconPapers)
JEL-codes: G01 G11 G15 G17 C58 (search for similar items in EconPapers)
Date: 2016
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