Impact of September 11, 2001 (911) in the Emerging Market's stock volatility

Mahfuzul Haque

International Journal of Business and Emerging Markets, 2010, vol. 2, issue 3, 305-327

Abstract: The study employs the GARCH model to investigate the time varying risk premium, volatility, and persistence of shocks to volatility for the Emerging Markets (EM) taking in consideration the event of September 11, 2001 (911). The results highlight several findings: (a) the variance of EM returns appears to be decreasing over time; (b) the correlation appears to have increased among EM's following the event of 911; (c) the correlation between EM, Europe and BRIC seems to be increasing; (d) holding short-term asset in the emerging regional market do not provide the investors with the reward they usually seek, but holding long-term assets provides the risk premiums normally expected by investors.

Keywords: risk premiums; conditional volatility; GARCH model; generalised autoregressive conditional heteroscedasticity; stock markets; shock persistence; decreasing variances; increased correlation; Europe; BRIC countries; Brazil; Russia; India; China; short-term assets; long-term assets; investors; September 11 attacks; 911; USA; United States; terrorism; emerging markets; regional markets. (search for similar items in EconPapers)
Date: 2010
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