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Time-Scale Decomposition of Price Transmission in International Markets

Viviana Fernandez

Emerging Markets Finance and Trade, 2005, vol. 41, issue 4, 57-90

Abstract: This paper focuses on return spillovers in stock markets at different time scales using wavelet analysis. We look at eight stock indices that comprise the G7 countries, emerging Asia, Western Europe, Eastern Europe and the Middle East, the emerging Far East, Latin America, North America, and the Pacific region for the period 1990-2002. Our estimation results show evidence of price spillovers from the G7 countries to Europe, Eastern Europe and the Middle East, emerging Asia, Europe, Latin America, and North America. However, price spillovers from these regions to the G7 countries are weaker at different time scales. Similarly, we find price spillovers from North America to Latin America, emerging Asia, the emerging Far East, and the Pacific region, and from both Europe and Latin America to North America. Our results are robust to the existence of asymmetric generalized autoregressive conditional heteroskedasticity (GARCH) effects and serial correlation in returns. We believe that our findings are potentially relevant to portfolio risk management.

Keywords: A-PGARCH models; spillovers; wavelet analysis (search for similar items in EconPapers)
Date: 2005
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Handle: RePEc:mes:emfitr:v:41:y:2005:i:4:p:57-90