Jump Diffusion Processes and Emerging Bond and Stock Markets: An Investigation Using Daily Data

Mandeep S. Chahal () and Jun Wang
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Mandeep S. Chahal: Enron Capital and Trade Resources, U.S.A
Jun Wang: SAS Institute Inc., U.S.A

Multinational Finance Journal, 1997, vol. 1, issue 3, 169-197

Abstract: The underlying stochastic processes that drive returns in several emerging bond and stock markets are investigated using the pure diffusion, the jump diffusion, the ARCH pure diffusion, and the ARCH jump diffusion models. The results indicate that jump diffusion models fit the data better than pure diffusion models. Possible sources and linkages of information surprises in emerging stock and bond markets are also investigated. Bond and stock returns of the same country exhibit simultaneous jumps, indicating a possible linkage of the two markets. U.S. equity returns respond to jumps in emerging bond markets but not to jumps in emerging stock markets.

Keywords: emerging markets; ARCH; jump diffusion; information surprises; distribution characteristics (search for similar items in EconPapers)
JEL-codes: C51 F36 G12 G14 (search for similar items in EconPapers)
Date: 1997
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:1:y:1997:i:3:p:169-197

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