BazEkon - The Main Library of the Cracow University of Economics

BazEkon home page

Main menu

Sokalska Magdalena (Szkoła Główna Handlowa w Warszawie)
Common Volatility in Emerging Market Equity Returns
Zeszyty Naukowe Uniwersytetu Szczecińskiego. Finanse, Rynki Finansowe, Ubezpieczenia, 2004, nr 2, Cz. 2, s. 61-71, rys., tab., bibliogr. 21 poz.
Issue title
Rynek kapitałowy: skuteczne inwestowanie
Rynki wschodzące, Stopa zwrotu, Kapitał, Zmienność
Emerging markets, Rate of return, Capital, Variability
The major question investigated in the literature on emerging markets is whether financial liberalisation resulted in any significant changes in the stock returns processes. Although average returns seem to have decreased after liberalisation, as documented by Richards (1996), Bekaert and Harvey (2003), there is no uniform impact on the magnitude of volatility. The fact that there has been no clear tendency for an increase or a decrease in the magnitude of standard deviations of developing countries' equity returns gives no indication about the so called commonality of conditional variance or stochastic variance. This paper uses the unobserved components framework to investigate the commonality in the volatility process in emerging markets equity returns from the end of 1980s until 2003. Following Harvey, Ruiz and Shephard (1994), we construct a multivariate stochastic volatility model. We decompose returns on regional equity indices into components and investigate how they evolve in time. We find that stochastic volatility components in emerging market regional equity indices exhibited high correlation over the whole analysed period. We also find evidence of a substantially increased comovement of the analysed components coinciding with a period of liberalisation of financial markets in developing countries.(original abstract)
The Library of University of Economics in Katowice
The Main Library of Poznań University of Economics and Business
Szczecin University Main Library
  1. Bekaert G. Harvey C.R. (2003). Emerging Markets Finance, Journal of Empirical Finance. 10 . p. 3-56.
  2. Bekaert G. Harvey C.R. (2002). Research in Emerging Markets Finance: Looking to the Future, Emerging Markets Review. p. 429-448.
  3. Bollerslev T. (1986) Generalized Autoregressive Conditional Heteroskedasticity, Journal of Econometrics 31. p. 307-327.
  4. Bowman K.O., Shenton L.R. (1975). Omnibus Test Contours For Departures From Normality Based on and b2, Biometrika. 62. p. 243-250.
  5. Chuhan P., Claessens S., Mamingi N. (1993). Equity And Bond Flows To Asia And Latin America: The Role Of Global And Country Factors, Journal of Development Economies. 55. p. 439-463.
  6. De Santis G. (1993). Asset Pricing And Portfolio Diversification: Evidence From Emerging Financial Markets, red. S. Claessens, S. Gooptu. Portfolio Investment in Developing Countries, Discussion Paper 228, World Bank. Washington DC.
  7. Engle R.F. (1982). Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation, Econometrica. 50(4). p. 987-1007.
  8. Engle R.F., Susmel R. (1993). Common Volatility in International Equity Markets, Journal of Business and Economic Statistics. 11. p. 167 - 176.
  9. Ghysels E., Harvey A., Renault E. (1996). Stochastic Volatility, Handbook of Statistics. 14, North Holland. Amstersdam.
  10. Hamilton J.D. (1994). Time series analysis, Princeton Univ. Press. Princeton N.J.
  11. Harvey A.C. (1989). Forecasting, Structural Time Series Models and the Kalman Filter. Cambridge University Press. Cambridge.
  12. Harvey A.C. Ruiz E., Shephard N. (1994). Multivariate Stochastic Volatility Models, Review of Economic Studies. 61. p. 247-264.
  13. Harvey C.R. (1995a). Predictable Risk and Returns in Emerging Markets, Review of Financial Studies. 8(3). p. 773-816.
  14. Harvey C.R. (1995b). The Risk Exposure of Emerging Equity Markets, World Bank Economic Review. 9( 1). p. 19-50.
  15. Henry P. (2000). Stock Market Liberalization, Economic Reform. And Emerging Market Equity Prices, Journal of Finance.55. p.529-564.
  16. Jacquier E., Polson N., Rossi P.E. (1999). Stochastic Volatility: Univariate And Multivariate Extensions. unpublished manuscript.
  17. Kim S., Shephard N., Chib S. (1998). Stochastic Volatility: Likelihood Inference And Comparison With ARCH Models, Review of Economic Studies. 65. p.361-93.
  18. Pajor A. (2001). Modele stochastycznej zmienności: Estymacja metodą quasi-największej wiarygodności. Przegląd Statystyczny. 48( I). p. 203-224.
  19. Pajor A. (2003). Procesy zmienności stochastycznej (SV) w bayesowskiej analizie finansowych szeregów czasowych, w: red. A. Welfe. Metody ilościowe w naukach ekonomicznych, Wydawnictwo SGH. Warszawa.
  20. Richards A. (1996): Volatility and Predictability in National Markets: How Do Emerging and Mature Markets Differ?. IMF Staff Papers. IMF. Washington.
  21. International capital markets (various issues), International Monetary Fund, Washington D.C
Cited by
Share on Facebook Share on Twitter Share on Google+ Share on Pinterest Share on LinkedIn Wyślij znajomemu