An examination of return and volatility spillovers between mature equity markets

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

Journal of Economics and Finance, 2019, vol. 43, issue 1, No 11, 180-210

Abstract: Abstract We examine price discovery and volatility spillover among equity markets of eight mature market economies (MMEs) – Australia, Canada, France, Germany, Italy, Japan, U.K. and U.S.A. – from January 2003 to July 2014, covering three sub-periods – prior to the 2007–09 global financial crisis (GFC), during crisis, and post-crisis. The results of price discovery indicate that the equity markets of Italy and the U.K. lead other markets in pre-crisis and crisis periods, respectively. No single market is dominant in post-crisis period. Dynamic cointegration results reconfirm our findings from Johansen’s co-integration test. For the full sample period as well as sub-periods, asymmetric dynamic conditional correlation (ADCC-EGARCH) coefficients are high between Australia and Japan, and among European Union MMEs. U.S. is negatively associated with other MMEs, except Canada with whom it seems to be uncorrelated. In the BEKK-EGARCH analysis, we find no long-term volatility spillovers for France and Germany with Italy, U.K. and U.S., in the post-crisis period. Our findings confirm reduced economic influence of the U.S. on other mature markets, as a result of the crisis. Further, regional patterns are observed in information linkages for the sample markets. The findings of the study have implications for policy makers and investors.

Keywords: Mature 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: 2019
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s12197-018-9442-1

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