Integration at a cost: Evidence from volatility impulse response functions

Ekaterini Panopoulou and Theologos Pantelidis

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: We investigate the international information transmission between the U.S. and the rest of the G-7 countries using daily stock market return data covering the last 20 years. A pre-1995 and post- 1995 analysis reveals that the linkages between the markets have changed substantially in the more recent era, suggesting that national markets have become more interdependent. In the majority of the countries under scrutiny, we provide evidence of direct volatility spillovers, running mainly from the US and pointing to more rapid information transmission during the recent years. We further uncover the dynamics of the volatility spillovers between the international stock markets by means of a Volatility Impulse Response Analysis. Our findings, based on three historical shocks that have caused turbulence in the stock markets, suggest that the persistence of volatility shocks has increased substantially during the post-1995 period mainly due to increased persistence and interdependence in the volatility of all markets. As a result, volatility shocks in the international stock markets nowadays perpetuate for a significant longer period compared to the pre-1995 era.

Keywords: volatility spillovers; volatility impulse response functions; stock market; ARCH-BEKK (search for similar items in EconPapers)
JEL-codes: C32 G15 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2005-03
New Economics Papers: this item is included in nep-ets and nep-fin
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Journal Article: Integration at a cost: evidence from volatility impulse response functions (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:may:mayecw:n1540305

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