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Emerging Equity Market Volatility

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Author Info
Geert Bekaert
Campbell R. Harvey

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Abstract

Returns in emerging capital markets are very different from returns in developed markets. While most previous research has focused on average returns, we analyze the volatility of the returns in emerging equity markets. We characterize the time-series of volatility in emerging markets and explore the distributional foundations of the variance process. Of particular interest is evidence of asymmetries in volatility and the evolution of the variance process after periods of capital market reform. We shed indirect light on the question of capital market integration by exploring the changing influence of world factors on the volatility in emerging markets. Finally, we investigate the cross-section of volatility. We use measures such as asset concentration, market capitalization to GDP, size of the trade sector, cross-sectional volatility of individual securities within each country, turnover, foreign exchange variability and national credit ratings to characterize why volatility is different across emerging markets.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5307.

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Date of creation: Jun 1997
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Handle: RePEc:nbr:nberwo:5307

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F3 - International Economics - - International Finance
G0 - Financial Economics - - General

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  1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
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  3. King, Mervyn A & Wadhwani, Sushil, 1990. "Transmission of Volatility between Stock Markets," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 3(1), pages 5-33. [Downloadable!] (restricted)
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  4. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March. [Downloadable!] (restricted)
  5. Marcio Gomes Pinto Garcia & G. Bekaert & C.R. Harvey, 1995. "The role of capital markets in economic growth," Textos para discussão 342, Department of Economics PUC-Rio (Brazil). [Downloadable!]
  6. Tim Bollerslev & Jeffrey Wooldridge, 1992. "Quasi-maximum likelihood estimation and inference in dynamic models with time-varying covariances," Econometric Reviews, Taylor and Francis Journals, vol. 11(2), pages 143-172. [Downloadable!] (restricted)
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  8. Engle, Robert F & Gonzalez-Rivera, Gloria, 1991. "Semiparametric ARCH Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(4), pages 345-59, October.
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  9. King, Mervyn & Sentana, Enrique & Wadhwani, Sushil, 1994. "Volatility and Links between National Stock Markets," Econometrica, Econometric Society, vol. 62(4), pages 901-33, July. [Downloadable!] (restricted)
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  10. Harvey, Campbell R, 1995. "Predictable Risk and Returns in Emerging Markets," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 8(3), pages 773-816. [Downloadable!] (restricted)
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  11. Schwert, G William, 1989. " Why Does Stock Market Volatility Change over Time?," Journal of Finance, American Finance Association, vol. 44(5), pages 1115-53, December. [Downloadable!] (restricted)
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  12. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May. [Downloadable!] (restricted)
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  13. Ng, Victor & Engle, Robert F. & Rothschild, Michael, 1992. "A multi-dynamic-factor model for stock returns," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 245-266. [Downloadable!] (restricted)
  14. Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July. [Downloadable!] (restricted)
  15. Bekaert, Geert, 1995. "Market Integration and Investment Barriers in Emerging Equity Markets," World Bank Economic Review, Oxford University Press, vol. 9(1), pages 75-107, January.
  16. Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report 157, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  17. Richardson, Matthew & Smith, Tom, 1993. "A Test for Multivariate Normality in Stock Returns," Journal of Business, University of Chicago Press, vol. 66(2), pages 295-321, April. [Downloadable!] (restricted)
  18. Geert Bekaert & Campbell R. Harvey, 1994. "Time-Varying World Market Integration," NBER Working Papers 4843, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. Claessens, Stijn & Dasgupta, Susmita & Glen, Jack, 1995. "Return Behavior in Emerging Stock Markets," World Bank Economic Review, Oxford University Press, vol. 9(1), pages 131-51, January.
  20. Diebold, Francis X & Nerlove, Marc, 1989. "The Dynamics of Exchange Rate Volatility: A Multivariate Latent Factor Arch Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(1), pages 1-21, Jan.-Mar.. [Downloadable!] (restricted)
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  21. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April. [Downloadable!] (restricted)
  22. Heston, Steven L. & Rouwenhorst, K. Geert, 1994. "Does industrial structure explain the benefits of international diversification?," Journal of Financial Economics, Elsevier, vol. 36(1), pages 3-27, August. [Downloadable!] (restricted)
  23. Harvey, Campbell R, 1995. "The Risk Exposure of Emerging Equity Markets," World Bank Economic Review, Oxford University Press, vol. 9(1), pages 19-50, January.
  24. Marcio Gomes Pinto Garcia & G. Bekaert & C.R. Harvey, 1995. "The contribution of speculators to effective financial markets," Textos para discussão 341, Department of Economics PUC-Rio (Brazil). [Downloadable!]
  25. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January. [Downloadable!] (restricted)
  26. Ferson, Wayne E & Harvey, Campbell R, 1993. "The Risk and Predictability of International Equity Returns," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 6(3), pages 527-66. [Downloadable!] (restricted)
  27. Geert Bekaert & Robert J. Hodrick, 1992. "Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets," NBER Working Papers 3790, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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