Market volatility across countries – evidence from international markets

Abstract

Purpose

The purpose of this paper is to investigate the time‐varying risk return relationship and the persistence of shocks to volatility within GARCH framework both in developed and emerging markets.

Design/methodology/approach

This paper uses nonlinear ARCH and GARCH‐family models for testing the volatility both in developed and emerging markets.

Findings

The findings of the paper suggest that there is a long‐term persistence shock in emerging markets compared to developed markets.

Research limitations/implications

The data set used for the developed and emerging markets is not consistent in terms of sample period. However, this paper explores the venues for further research on the global diversification.

Practical implications

The implication of volatility measurement is vital in determining the cost of capital for investment and portfolio management, option pricing and for market regulations.

Originality/value

The unique features of the paper include large sample size with updated data set that reveals the nature of world economy and empirical evidence on volatility testing that reports the risk return characteristics of both developed and emerging markets.

Citation

Mollah, S. and Mobarek, A. (2009), "Market volatility across countries – evidence from international markets", Studies in Economics and Finance, Vol. 26 No. 4, pp. 257-274. https://doi.org/10.1108/10867370910995717