An Analysis of Volatility Spillover and Contagion Effects to the Frontier Markets
(2015) NEKN02 20151Department of Economics
- Abstract
- This thesis investigates the volatility spillover and contagion effects to the frontier markets from the developed markets and emerging markets and tries to identify if there exists any potential volatility effect which may have impact on the investment decision of these markets. In view of the growing globalization, financial markets become increasingly interdependent and the chances for the volatility transmission of one market to another increase, the implication of which is particularly crucial for international portfolio diversification alternatives. The data spans from January 2002 to December 2012 and uses stock market index data from two developed markets, two emerging markets and four frontier markets to study the impact of the... (More)
- This thesis investigates the volatility spillover and contagion effects to the frontier markets from the developed markets and emerging markets and tries to identify if there exists any potential volatility effect which may have impact on the investment decision of these markets. In view of the growing globalization, financial markets become increasingly interdependent and the chances for the volatility transmission of one market to another increase, the implication of which is particularly crucial for international portfolio diversification alternatives. The data spans from January 2002 to December 2012 and uses stock market index data from two developed markets, two emerging markets and four frontier markets to study the impact of the global financial crisis of USA. The entire sample is divided into two sub-sample periods. The analysis basically employs a CGARCH(1,1) model, along with cointegration, Granger Causality, cross-country correlations and a VAR framework. This study provides evidence about interdependence and long run equilibrium relationship between the frontier markets and developed & emerging markets. According to Granger Causality, the return dependency is unidirectional and causality comes from the developed and emerging markets to frontier markets. But according to the CGARCH analysis volatility spillover and contagion effects were found bi-directional, from Japan, China and India to Vietnam and from Argentina and Vietnam to India, during and after the global financial crisis. By analyzing the short run volatility of the targeted markets for the whole sample, we have found that short run volatility spillover mainly transmitted from developed and emerging markets to frontier markets. In this research we have also found negative volatility spillover effects from Argentina to China, from USA and Japan to Bangladesh and from Nigeria to India. So frontier markets could be thought of some good hedging opportunities. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/5473889
- author
- Huq, Umma Rumana LU
- supervisor
- organization
- course
- NEKN02 20151
- year
- 2015
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Volatility Spillover, Contagion effects, Frontier markets, CGARCH, Financial Crisis
- language
- English
- id
- 5473889
- date added to LUP
- 2015-06-29 13:23:00
- date last changed
- 2015-06-29 13:23:00
@misc{5473889,
abstract = {{This thesis investigates the volatility spillover and contagion effects to the frontier markets from the developed markets and emerging markets and tries to identify if there exists any potential volatility effect which may have impact on the investment decision of these markets. In view of the growing globalization, financial markets become increasingly interdependent and the chances for the volatility transmission of one market to another increase, the implication of which is particularly crucial for international portfolio diversification alternatives. The data spans from January 2002 to December 2012 and uses stock market index data from two developed markets, two emerging markets and four frontier markets to study the impact of the global financial crisis of USA. The entire sample is divided into two sub-sample periods. The analysis basically employs a CGARCH(1,1) model, along with cointegration, Granger Causality, cross-country correlations and a VAR framework. This study provides evidence about interdependence and long run equilibrium relationship between the frontier markets and developed & emerging markets. According to Granger Causality, the return dependency is unidirectional and causality comes from the developed and emerging markets to frontier markets. But according to the CGARCH analysis volatility spillover and contagion effects were found bi-directional, from Japan, China and India to Vietnam and from Argentina and Vietnam to India, during and after the global financial crisis. By analyzing the short run volatility of the targeted markets for the whole sample, we have found that short run volatility spillover mainly transmitted from developed and emerging markets to frontier markets. In this research we have also found negative volatility spillover effects from Argentina to China, from USA and Japan to Bangladesh and from Nigeria to India. So frontier markets could be thought of some good hedging opportunities.}},
author = {{Huq, Umma Rumana}},
language = {{eng}},
note = {{Student Paper}},
title = {{An Analysis of Volatility Spillover and Contagion Effects to the Frontier Markets}},
year = {{2015}},
}