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Return and volatility interdependences in up and down markets across developed and emerging countries

Srikanta Kundu and Nityananda Sarkar

Research in International Business and Finance, 2016, vol. 36, issue C, 297-311

Abstract: In this paper, we have used daily stock returns data from two developed and four emerging countries to analyse the behaviour of returns and volatility spillovers in two different stock market conditions called the up and down markets. To this end, we have proposed a VAR-TGARCH-M type model and incorporated the smooth transition behaviour to switch from one market condition to another. The results show that, in general, there is significant and asymmetric effect of returns and volatility of one market on another in up and down market conditions, but the sign of the effect varies over pairs of countries concerned and also of market conditions.

Keywords: Up-down market; Risk-return relationship; DCC; MGARCH; Spillover effects (search for similar items in EconPapers)
JEL-codes: C12 C32 C51 C52 G1 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1016/j.ribaf.2015.09.023

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