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Shock transmission among the European Stock markets - Conferinta CRESTERE ECONOMICA SI SUSTENABILITATE SOCIALA. PROVOCARI SI PERSPECTIVE EUROPENE>

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  • Lupu, Radu
Abstract
The analysis of the comovements of stock market returns was approached with many modeling techniques ranging from the simple and GARCH style dynamic conditional correlation to multivariate GARCH and studies of the bivariate distribution. The quest for the analysis of the now standardized concept of international contagion made room for the employment of all these techniques. Our paper focuses on the analysis of the comovements in the volatilities of the returns of stock market indices from the most important developed and emerging European countries, using different forms of computation for different frequencies, starting from intra-day 5-minute returns to weekly returns (data used from Bloomberg). After a brief characterization of the distribution of returns and a reconfirmation of the stylized facts for the European emerging markets we focus on the clustering effect of volatilities, in the attempt to identify the moments when a new cluster is formed, i.e. when the volatilities change their size (from small to big or from big to small). The analysis of these events for the respective countries intends to reveal the mechanism of international information transmission. The paper also fits a jump-diffusion process, along the lines of Maheu and McCurdy (2007) adjusted for the series of volatilities, where the Poisson process characterizes the time until a change in the volatility cluster occurs.

Suggested Citation

  • Lupu, Radu, 2011. "Shock transmission among the European Stock markets - Conferinta CRESTERE ECONOMICA SI SUSTENABILITATE SOCIALA. PROVOCARI SI PERSPECTIVE EUROPENE>," Institute for Economic Forecasting Conference Proceedings 101101, Institute for Economic Forecasting.
    • Handle: RePEc:rjr:wpconf:101101
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    References listed on IDEAS

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    More about this item

    Keywords

    comovement; returns’ volatility; European emerging stock markets;
    All these keywords.

    JEL classification:

    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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