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Conditional Heteroskedasticity and Global Stock Return Distributions

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  • Errunza, Vihang, et al

Abstract

This paper investigates conditional return distribution characteristics for seven developed markets (DMS) and eight emerging markets (EMs). With the exception of Germany and Japan, the behavior of monthly returns of DM sample countries is similar to that of the U.S. In contrast, EM returns exhibit a substantially greater degree of serial correlation and a higher incidence of autoregressive conditional heteroskedasticity (ARCH) in monthly data. Aggregation of returns into two- and three-month holding periods decreases the significance of the ARCH effects. However, there are cross-sectional differences in the rate at which ARCH effects become insignificant. The findings of ARCH in monthly returns sample data is attributed to differences in the rate at which information arrives and is transmitted into prices in each market. Coauthors are Kedreth Hogan, Jr., Omesh Kini, and Prasad Padmanabhan. Copyright 1994 by MIT Press.

Suggested Citation

  • Errunza, Vihang, et al, 1994. "Conditional Heteroskedasticity and Global Stock Return Distributions," The Financial Review, Eastern Finance Association, vol. 29(3), pages 293-317, August.
    • Handle: RePEc:bla:finrev:v:29:y:1994:i:3:p:293-317
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    Cited by:

    1. Lucy Ackert & Marie Racine, 1997. "The economics of conditional heteroskedasticity: Evidence from canadian and U.S. stock and futures markets," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 25(4), pages 371-385, December.
    2. Cheteni, Priviledge, 2013. "Non-linearity behaviour of the ALBI Index: A case of Johannesburg Stock Exchange in South Africa," MPRA Paper 56369, University Library of Munich, Germany.
    3. Jorge Belaire-Franch & Kwaku Opong, 2005. "A Variance Ratio Test of the Behaviour of Some FTSE Equity Indices Using Ranks and Signs," Review of Quantitative Finance and Accounting, Springer, vol. 24(1), pages 93-107, January.
    4. Drama Bedi Guy HERVE & Yao SHEN, 2010. "Management Of Stock Price And Its Effect On Economic Growth: Case Study Of West African Financial Markets," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(3(13)/Fal), pages 231-246.
    5. De Santis, Giorgio & imrohoroglu, Selahattin, 1997. "Stock returns and volatility in emerging financial markets," Journal of International Money and Finance, Elsevier, vol. 16(4), pages 561-579, August.
    6. Oehler, Andreas & Wendt, Stefan & Horn, Matthias, 2017. "Are investors really home-biased when investing at home?," Research in International Business and Finance, Elsevier, vol. 40(C), pages 52-60.
    7. repec:ebl:ecbull:v:7:y:2005:i:3:p:1-9 is not listed on IDEAS
    8. Sergio Da Silva & Paulo Ceretta & Silvia Nunes & Newton Da Costa, Jr, 2005. "Stockmarket comovements revisited," Economics Bulletin, AccessEcon, vol. 7(3), pages 1-9.
    9. Mario G. Reyes, 1999. "Size, time‐varying beta, and conditional heteroscedasticity in UK stock returns," Review of Financial Economics, John Wiley & Sons, vol. 8(1), pages 1-10.
    10. Reyes, Mario G., 1999. "Size, time-varying beta, and conditional heteroscedasticity in UK stock returns," Review of Financial Economics, Elsevier, vol. 8(1), pages 1-10, June.
    11. Opong, Kwaku K. & Mulholland, Gwyneth & Fox, Alan F. & Farahmand, Kambiz, 1999. "The behaviour of some UK equity indices: An application of Hurst and BDS tests1," Journal of Empirical Finance, Elsevier, vol. 6(3), pages 267-282, September.
    12. M. Kabir Hassan & Anisul M. Islam & Syed Abul Basher, 2000. "Market Efficiency, Time-Varying Volatility and Equity Returns in Bangladesh Stock Market," Working Papers 2002_6, York University, Department of Economics, revised Jun 2002.
    13. Ortiz, Edgar & Arjona, Enrique, 2001. "Heterokedastic behavior of the Latin American emerging stock markets," International Review of Financial Analysis, Elsevier, vol. 10(3), pages 287-305.
    14. Murinde V. & Poshakwala S., 2001. "Volatility in the Emerging Stock Markets in Central and Eastern Europe: Evidence on Croatia, Czech Republic, Hungary, Poland, Russia and Slovakia," European Research Studies Journal, European Research Studies Journal, vol. 0(3-4), pages 73-102, July - De.
    15. Drama, Bedi Guy Herve & Yao, Shen, 2010. "Management of Stock Price and it Effect on Economic Growth: Case study of West African Financial Markets," MPRA Paper 24907, University Library of Munich, Germany.
    16. Gulnur Muradoglu & Hakan Berument & Kivilcim Metin, 1999. "Financial Crisis and Changes in Determinants of Risk and Return: An Empirical Investigation of an Emerging Market (ISE)," Multinational Finance Journal, Multinational Finance Journal, vol. 3(4), pages 223-252, December.
    17. Andreas Oehler & Stefan Wendt & Matthias Horn, 2016. "Internationalization of Blue-Chip versus Mid-Cap Stock Indices: an Empirical Analysis for France, Germany, and the UK," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(4), pages 501-518, December.
    18. Husain, Fazal & Forbes, Kevin, 1999. "Efficiency in a Thinly Traded Market: The Case of Pakistan," MPRA Paper 5355, University Library of Munich, Germany.
    19. Jorge Belaire-Franch & Stanley McGreal & Kwaku K. Opong & James R. Webb, 2007. "A Nonparametric Variance-Ratio Test of the Behavior of U.K. Real Estate and Construction Indices," International Real Estate Review, Global Social Science Institute, vol. 10(2), pages 94-112.
    20. Syed Basher & M. Kabir Hassan & Anisul Islam, 2007. "Time-varying volatility and equity returns in Bangladesh stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 17(17), pages 1393-1407.

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