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The purpose of this paper is to examine volatility transmissions between portfolios of cross‐listed equities and exchange rate differences and also the volatility persistence for home, foreign equities, and exchange rate differences in the UK and German markets.

A primary focus of this paper is to see if there is an impact first on the volatility persistence for foreign equities that are listed in the UK and German markets, second on the respective home portfolios of cross‐listed equities, and third on the exchange rate differences. In addition, whether there are any bilateral spillovers between the following equity portfolios: foreign cross‐listed equities, home cross‐listed equities, and also local or global exchange rate differences are investigated.

The paper finds that the volatility persistence is more prominent than error persistence from cross‐listed equities, foreign or home, and the exchange rate differences. Furthermore, the transmission mechanism indicates a bilateral integration process in some of the cases that were examined. Based on these results, it is concluded that in the UK market the foreign cross‐listings affect less the domestic equities compared to the German market.

This paper examines the interdependence of portfolios of home and foreign equities for cross‐listings that belong to the same stock exchange with two exchange rates, a local and a global one in order to provide more evidence in this area of literature.

The purpose of this paper is to investigate the volatility linkage between global oil market and major South Asian equity markets.

In order to serve the purpose, the authors employ a recently developed vector autoregressive-generalized autoregressive conditional heteroskedastic model to examine whether shocks and volatility spill over from the oil market to various equity markets under consideration.

The findings of the empirical analysis suggest that all the markets studied do receive volatility from the oil market. Not surprisingly, the authors do not find any significant evidence of volatility transmission from the equity markets to the global oil market. Additionally, while computing the optimal portfolio weights and hedge ratios, the authors document that inclusion of oil in the portfolio of stocks tends to reduce the risk of the resultant portfolio.

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This paper aims to investigate the return links and volatility transmission between five major equity markets of the Latin American region and the USA over the period 1993-2012.

The authors employ a multivariate vector autoregressive moving average – generalized autoregressive conditional heteroskedasticity (VAR-GARCH) methodology which allows for cross-market transmissions in both return and volatility. Moreover, we show how the obtained results can be used to design internationally diversified portfolios involving the Latin American assets and to analyze the effectiveness of hedging strategies.

The results point to the existence of substantial cross-market return and volatility spillovers and are thus crucial for international portfolio management in the Latin American region. However, the intensity of shock and volatility cross effects varies across the studied markets.

The optimal weights and hedging ratios that we compute from the observed return and volatility spillovers, suggest that adding the Latin American assets helps improve the risk-adjusted return of the internationally diversified portfolios as well as reduce their risk exposure. For policymakers and market authorities, an increase in the level of shock interactions and volatility transmission between the US and Latin American equity markets as well as among these Latin American markets implies that the stability of the financial system in one country can be deeply affected by the disturbances in another country.

The authors extend the previous works on Latin American emerging markets by examining the extent of shock and volatility transmission as well as portfolio design and management from the point of view of both the US (global) and Latin American investors.

Recent trends and developments in Bitcoin have led to a proliferation of studies that analyzed the Bitcoin returns and volatility; however, the volatility connectedness between Bitcoin and equity market information in emerging countries quietly remains scarce. Regarding this deficiency, the purpose of this paper is to examine the dynamic connectedness between Bitcoin and equity market information.

Daily data from January 1, 2012 to May 31, 2018 are used. The paper applies a novel time-varying parameter vector autoregression (TVP-VAR) model extended by Antonakakis and Gabauer (2017). This model addresses the biases in coefficient estimates, considering innovations from sources of time variation.

The findings reveal that the volatility transmission of Bitcoin return is not an important source of shocks of market returns in Brazil, Russia, India, China and South Africa (BRICS), suggesting that Bitcoin return contributes less volatility to equity market information. The results further show that Bitcoin is the main receiver of volatility while market price risk is the dominant transmission catalysts for innovations in the rest of the stock market returns.

Important implications can be derived from these findings, signaling of the demand to develop and implement volatility connectedness policy measures in order to guarantee the stability of financial assets. However, the most significant limitation lies in the fact that the analysis of this paper is restricted to the volatility connectedness between Bitcoin and equity market information in BRICS countries.

By acknowledging the wide range of econometric models, the paper uses TVP-VAR model because this methodology is a useful and relevant tool in modeling the volatility connectedness of financial variables, thus providing meaningful information to policy makers and international investors.

The purpose of this paper is to examine information and volatility linkages among real estate, equity, bond and money markets in Australia.

A novel rational expectations framework of financial contagion (Kodres and Pritsker, 2002), along with a combination of robust statistical methods including simple and dynamic correlations and generalized impulse response (Fereidouni et al., 2014) have been employed using data covering three dynamic pre-pandemic economic cycles, namely, global financial crisis (GFC) period, pre-pandemic housing boom and pre-pandemic housing downturn from 2008 (February) to 2019 (December).

Results reveal information linkages across real estate, equity, bond and money markets through correlations in return and volatilities of these series. Finding indicates that the three financial markets (equity, bond and money markets) are interdependent and integrated through information and volatility linkages during the GFC period and pre-pandemic housing downturn period. Financial markets have stronger associations with real estate market during pre-pandemic housing boom. The findings contribute to the general notion that the performances of three financial markets are closely related to the “boom” phase of the real estate cycle.

This research provides an extension of existing literature regarding the information and volatility contagion of the expanded set of core investment markets in Australia. The findings could assist household buyers and investors in designing strategic investment portfolios/hedging strategies and minimizing asset specific risks through diversification over short-term and long-term. In addition, results could support the maintenance, growth and development of a combination of competitive balanced investment markets including real estate, equity, bond and money markets in post-pandemic economy.

The authors aim to examine the mean and volatility linkages between the gold market and the Latin American equity markets in the entire sample period and two crises periods, namely the US financial crisis and the Chinese crash.

To examine the return and volatility spillovers, the authors employ VAR-BEKK-GARCH model on the daily data of four emerging Latin American equity markets which include Peru, Chile, Brazil and Mexico, which ranges from January 2000 to June 2018.

The results show that the return transmissions vary across the stock markets and the crises periods. The volatility transmission is found to be bidirectional between the gold and stock markets of Brazil and Chile during the US financial crisis. Furthermore, the volatility spillover is unidirectional from Brazil to gold and from gold to Peru stock market during the Chinese crash. We also calculate the optimal weights hedge ratios for gold and stock portfolio. The result suggests that portfolio managers need to increase the weight of gold for the equity portfolios of Peru and Mexico during the US financial crisis. Furthermore, during the Chinese crisis, investors may raise the investment in gold for the equity portfolios of Brazil and Chile. Finally, the cheapest hedging strategy is CHIL/GOLD during the US financial crisis, whereas MEXI/GOLD during the Chinese crash.

These findings have useful insights for portfolio diversification, asset pricing and risk management.

The study's outcome provides policymakers and investors with in-depth insights regarding hedging, risk management and portfolio management.

The purpose of this paper is to dissect the dynamic linkages between foreign equity flows, exchange rates and equity returns in the Philippines.

Using a parsimonious SVARX‐GARCH model and unique daily equity flow data, this research models the relationship between net equity flows, conditional variance of stock returns and conditional variance of exchange rates.

The authors find several noteworthy results, which are unique to this study and several results that confirm existing literature. Much of existing literature on foreign equity flows into emerging economies find that foreign equity investors are trend chasers and equity flows are auto correlated. The authors confirm these finding in the Philippines and document two new and important findings. First, it was found that unexpected increases in foreign equity flows to the Philippines increases the conditional volatility of the Filipino stock market significantly over the next two weeks of trading. The second major finding is that unexpected shocks to foreign equity flows sharply increases the conditional variance of the USD/PHP exchange rate over the next two to three weeks of trading.

Taken together, the results indicate that foreign equity investment, while providing many benefits for small open economies such as the Philippines, does in the short run increase the conditional variance of both the equity market and exchange rates. Policy makers must weigh the benefits of increased risk sharing and the potential for lower costs of capital with the short‐run potential for increase swings in asset prices.

This paper is one of the only studies of its kind to test the impact of foreign equity flows on the conditional volatility of returns and exchange rates.

The purpose of this paper is to investigate the linkages among equity exchange traded funds (ETF) returns and transmission of volatilities of the USA, Europe and key emerging countries’ stock markets. Standard & Poor’s 500 (spy) and iShares Europe are used to represent the USA and European stock markets, the emerging market part of the data set consists of daily returns of equity ETF representing broad equity market indices of the BRIC countries (Brazil, Russia, India and China); the mist countries (Mexico, Indonesia, South Korea and Turkey) and South Africa and covers the period of February 3, 2012-February 28, 2014.

The paper utilizes multi-variate auto-regressive moving-averages (MARMA) methodology to study equity market returns and spillovers. Second, generalized auto-regressive conditional heteroskadasticity (GARCH) modeling is employed to model volatility persistence and transmissions.

The findings include the existence of significant co-movement of returns among all country ETFs; however, despite increasing interdependencies among the global stock markets there are still very good opportunities for diversification. For example, USA and Europe based investors may do well to ignore opportunities in each other’s markets but can realize diversification benefits by investing in ETFs representing China, South Africa and Turkey. As far as volatilities are concerned, the findings indicate that no ETF volatility is transmitted from the sample countries to USA, Brazil, China and South African stock markets. Also, US market volatility is transmitted to India, Russia, Mexico and Turkey while European volatility spills over to Mexico and South Korea. The presence of spillovers among stock markets’ return series and persistence of volatilities are useful to investors interested in diversifying their portfolios and to traders/fund managers who are interested in maximizing returns.

The implications include: first, investors should not only rely on current domestic news to guide their investment decisions, but also take into consideration international news for there are substantial spillovers. Second, given that volatilities can proxy for risk, there are lessons for both individual and institutional investors in terms of further examining pricing securities, hedging and other trading strategies as well as framing regulatory policies. Third, investors should be able to ride the financial cycle by following closely monetary policies of the FED and European Central Bank and resulting credit expansion or contraction since research indicates (and as corroborated in this study) equity prices are linked to VIX which is also correlated with capital flows and credit expansion and interest rates. Limitations include: first, the investigation could be expanded to include individual countries in Europe instead of using one Europe-wide ETF. As ETFs for other emerging markets become available it is also possible to include additional countries. Second, ETFs may not be the best vehicles for diversification.

Methodology (MARMA and GARCH) is widely used for analyzing financial data. The use of BRIC and MIST countries and the interaction among them may be novel. Spillovers among emerging financial markets is a fairly new area. Typically, the authors see studies of spillovers from the developed countries to the developing ones. The data period is important since it covers both credit expansion and contraction (or the start of it) by the FED and is current.

This paper aims to investigate the linkages among foreign direct investment (FDI – greenfield and mergers and acquisitions [M&A]) decisions and equity market returns and volatilities. The main premise is that FDI decisions by multinational enterprises (MNE) are influenced by risk and uncertainty indicated by equity market returns and volatilities in the destination (host) countries. This is so because the events on the stock markets in general and their volatilities in particular signal the vitality of the investment climate of the target market. Understanding volatility in capital markets is important for determining the cost of capital and for evaluating direct investment and asset allocation decisions.

Surveys and structured interviews were conducted with senior managers of 11 MNEs based in the USA to collect the data used in this study from November 2017 to October 2018. The paper investigates if FDI decisions of the MNE managers are influenced by risk and uncertainty indicated by equity market returns and volatilities. The paper endeavors to make a contribution to the IB literature in highlighting the role played by equity returns and volatilities in FDI decisions and therewith attempts to integrate finance (capital markets) with international business/strategic decision-making.

Capital market performances (returns and volatilities) were found to influence the country choice for location of production facilities (FDI – both greenfield and M&A decisions) as well as timing of the FDI by a MNE. In other words, the share of production capacity optimally located abroad and M&A activities are affected by capital market returns and volatilities.

This chapter examines dynamic connectedness among emerging Asian equity markets as well as explores their linkages vis-à-vis other major global markets. We find that international equity markets are tightly integrated. Measuring connectedness based on a generalized Vector Autoregressive (VAR) model, more than half of all total forecast error variance in equity return and volatility shocks come from other markets as opposed to country own shocks. When examining the degree of connectedness over time, we find that international stock markets have become increasingly connected, with a gentle upward trend since the Asian financial crisis (AFC) but with a rapid burst during the global financial crisis (GFC). Despite the growing importance of Asian emerging markets in the world economy, we find that their influence on advanced economies are still relatively small, with no significant increase over time. During the past decade, advanced markets have been consistently net transmitters of shocks while emerging Asian markets act as net receivers. Based on the nature of equity shock spillovers, we also find that advanced countries are still tightly connected among themselves while intraregional connectedness within Asia remains strong. By investigating whether uncertainty plays an important role in explaining the degree of stock market connectedness, we find that economic policy uncertainty (EPU) from the US is an important source of financial shock spillover for the majority of international equity markets. In contrast, US financial market uncertainty as proxied by the VIX index drives equity market spillovers only among advanced economies.