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Volatility and dynamic conditional correlations of worldwide emerging and frontier markets

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  • Baumöhl, Eduard
  • Lyócsa, Štefan

Abstract

This study examines the relationship between time-varying correlations and conditional volatility among 32 worldwide emerging and frontier stock markets and the MSCI World stock market index from January 2000 to December 2012. Correlations are estimated in the standard and asymmetric dynamic conditional correlation model frameworks. The results can be summarized by three main findings: (1) asymmetry in volatility is not a common phenomenon in emerging and frontier markets; (2) asymmetry in correlations is found only with respect to the Hungarian stock market; and (3) the relationship between volatility and correlations is positive and significant in most countries. Thus, diversification benefits decrease during periods of higher volatility.

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  • Baumöhl, Eduard & Lyócsa, Štefan, 2014. "Volatility and dynamic conditional correlations of worldwide emerging and frontier markets," Economic Modelling, Elsevier, vol. 38(C), pages 175-183.
    • Handle: RePEc:eee:ecmode:v:38:y:2014:i:c:p:175-183
    DOI: 10.1016/j.econmod.2013.12.022
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    Cited by:

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    3. Maghyereh, Aktham I. & Awartani, Basel & Hilu, Khalil Al, 2015. "Dynamic transmissions between the U.S. and equity markets in the MENA countries: New evidence from pre- and post-global financial crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 56(C), pages 123-138.
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    7. Lyócsa, Štefan & Baumöhl, Eduard, 2015. "Similarity of emerging market returns under changing market conditions: Markets in the ASEAN-4, Latin America, Middle East, and BRICs," Economic Systems, Elsevier, vol. 39(2), pages 253-268.
    8. Štefan Lyócsa & Roman Horváth, 2018. "Stock Market Contagion: a New Approach," Open Economies Review, Springer, vol. 29(3), pages 547-577, July.
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    10. Shreevastava Aman & Raza Shahil & Bharat Kumar Meher & Ramona Birau & Anand Abhishek & Mircea Laurentiu Simion & Nadia Tudora Cirjan, 2024. "Exploring Advanced GARCH Models for Analyzing Asymmetric Volatility Dynamics for the Emerging Stock Market in Hungary: An Empirical Case Study," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 41-52.
    11. Mimouni, Karim & Charfeddine, Lanouar & Al-Azzam, Moh'd, 2016. "Do oil producing countries offer international diversification benefits? Evidence from GCC countries," Economic Modelling, Elsevier, vol. 57(C), pages 263-280.
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    13. Eduard Baumöhl & Štefan Lyócsa, 2014. "Risk-Return Convergence in CEE Stock Markets: Structural Breaks and Market Volatility," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(5), pages 352-373, November.
    14. Ahmed, Walid M.A., 2020. "Corruption and equity market performance: International comparative evidence," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    15. Mokni, Khaled & Mansouri, Faysal, 2017. "Conditional dependence between international stock markets: A long memory GARCH-copula model approach," Journal of Multinational Financial Management, Elsevier, vol. 42, pages 116-131.
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    More about this item

    Keywords

    Conditional volatility; Time-varying correlations; Emerging and frontier markets;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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