Volatility and dynamic conditional correlations of worldwide emerging and frontier markets

Eduard Baumohl and Štefan Lyócsa

Economic Modelling, 2014, vol. 38, issue C, 175-183

Abstract: This study examines the relationship between time-varying correlations and conditional volatility among 32 worldwide emerging and frontier stock markets and the MSCI World stock market index from January 2000 to December 2012. Correlations are estimated in the standard and asymmetric dynamic conditional correlation model frameworks. The results can be summarized by three main findings: (1) asymmetry in volatility is not a common phenomenon in emerging and frontier markets; (2) asymmetry in correlations is found only with respect to the Hungarian stock market; and (3) the relationship between volatility and correlations is positive and significant in most countries. Thus, diversification benefits decrease during periods of higher volatility.

Keywords: Conditional volatility; Time-varying correlations; Emerging and frontier markets (search for similar items in EconPapers)
JEL-codes: C32 G01 G15 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:38:y:2014:i:c:p:175-183

DOI: 10.1016/j.econmod.2013.12.022

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