Information linkages among emerging equity markets—an empirical study

Sanjay Sehgal () and Payal Jain ()
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Sanjay Sehgal: University of Delhi
Payal Jain: University of Delhi

DECISION: Official Journal of the Indian Institute of Management Calcutta, 2017, vol. 44, issue 1, No 3, 15-38

Abstract: Abstract In this paper, we examine the price discovery and volatility spillovers among equity markets of eight emerging market economies (EMEs)—Brazil, China, India, Indonesia, Mexico, Russia, South Africa and Turkey—from January 2003 to July 2014, covering the 2007–2009 global financial crisis (GFC). The analysis is conducted for pre-crisis, crisis and post-crisis periods. The results of price discovery indicate that Brazil leads in pre-crisis period while South Africa leads during crisis period. No single market is dominant in the post-crisis period and across the full sample period as well. Dynamic cointegration test largely confirms the findings from the static Johansen’s cointegration test. Employing asymmetric dynamic conditional correlation and BEKK-GARCH models, we find that volatility spillovers reduced among the sample markets over time. The empirical results suggest that the information linkages among the sample EMEs’ equity markets weakened during the GFC and did not revert to stable period levels after the crisis. The findings have implications for policy makers and investors.

Keywords: Emerging equity markets; Multivariate GARCH; Price discovery; Volatility spillover (search for similar items in EconPapers)
JEL-codes: C22 G15 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s40622-016-0144-2

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