Volatility and Information Linkages Across Markets and Countries

Petra Fleischer
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Petra Fleischer: School of Finance and Applied Statistics, Australian National University, Canberra ACT 0200.

Australian Journal of Management, 2003, vol. 28, issue 3, 251-272

Abstract: This study examines information and volatility linkages across the equity, money and bond markets within Australia and the US and across the two countries. These volatility linkages are due to common information and information spillovers caused by cross-market hedging. We employ a rational expectations framework in which information arrives randomly, causing volatility to be stochastic. The model imposes restrictions on the moments of returns which we estimate using GMM. We find that the model fits extremely well. The parameters are very stable across the various bivariate specifications. Cross-market linkages estimated using GMM are much stronger than those found with the commonly used proxies for volatility.

Keywords: STOCHASTIC VOLATILITY; MARKET LINKAGES; INFORMATION SPILLOVER (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:28:y:2003:i:3:p:251-272

DOI: 10.1177/031289620302800302

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