Regime Shifts and Volatility Spillovers on International Stock Markets

John Hassler

No 603, Seminar Papers from Stockholm University, Institute for International Economic Studies

Abstract: A standard capital asset pricing model is extended to allow for stochastic shifts in the volatility of the news process. This model is then estimated on bivariate stock market data to separate two exogenous news processes – a world and a domestic. The results indicate that the influence of the world news process on the Swedish stock market has increased significantly over the period 1970-1995. I also find that the foreign influence is much stronger when the volatility of the world news process is high. Furthermore, when the world state shifts to high risk, the Swedish stock market immediately reacts by a large fall, estimated to 7.0%. The bivariate model is also estimated on a set of other national stock markets.

Keywords: capital asset pricing model; stochastic shifts; news process; Swedish stock market (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Pages: 20 pages
Date: 1997-10-30
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://su.diva-portal.org/smash/get/diva2:327111/FULLTEXT01 (application/pdf)

Related works:
Working Paper: Regime Shifts and Volatility Spillovers on International Stock Markets (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:iiessp:0603

Access Statistics for this paper

More papers in Seminar Papers from Stockholm University, Institute for International Economic Studies Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Hanna Christiansson ().