Common Volatility: An Empirical Investigation of Closed-End Country Funds

Doseong Kim, Yoon-Goo Lee and Isabel Ruiz ()

Emerging Markets Finance and Trade, 2010, vol. 46, issue 2, 116-132

Abstract: The study of international integration of equity markets has received a great deal of interest. This paper investigates whether returns of forty-one closed-end country funds share a common volatility process with three comparable return series: the underlying net asset value (NAV), U.S. stock market returns, and foreign stock market returns. Country funds are a natural setting to test for international market integration, as they are traded in the U.S. market, whereas their underlying assets are traded in foreign stock markets. Our results indicate that only a few emerging markets' country funds share common volatility processes with their comparable asset returns. This, in turn, suggests weak linkages through the second moment of related assets.

Keywords: asset pricing; common volatility; country fund; market integration (search for similar items in EconPapers)
Date: 2010
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