Integration at cost: Evidence from volatility impulse response functions
Panopoulou, Ekaterini and Pantelidis, Theologos (2005) Integration at cost: Evidence from volatility impulse response functions. .
We investigate the international information transmission between the U.S. ant the rest of the G-7 counteries using daily stock market return data covering the last 20 years. Apre-1995 and post-1995 analysis reveals that the linkage between the markets have changed substantially in the more recent era. suggesting that national markets have become more interdependent. In the majority of the countries under serutiny, we provide evidence of direct volatility spillovers, running mainly from the US and pointing to more rapid information transmission during the recent years. We further uncover the dynamic and the volatility spillovers between the international stock market by means of a Volatility Impulse Response Analysis. Our findings, based on three historical shocks that have caused turbulence in the stock markets, suggest that the persistence of volatility stock has increased substantially during the post-1995 period maily due to increase persistance and interdepandence in the bolatiltiy of all markets. As a result, volatility stocks in the international stock markets nowdays perpetuate for a significant longer period compared to the pre-1995 era.
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