Measuring The Return And Volatility Spillovers Between European And Emerging Seven Stock Markets

Abstract

Purpose:The study intends to investigate the impact of stock market volatility spillover effect from the major European countries to the emerging seven countries. Method: The study has made use of VAR-GARCH methodology, by Ling and Mc-Aleer (2003)to analyze the stock prices of major European countries and emerging seven countries’ indices from 2010 to 2021. Findings:As expected, intense volatility spillover effect has been observed especially, from European countries to emerging seven ones.Germany, France, and UK, have substantial spillover effect to Indonesia, Brazil, Mexico, China and Turkey.  Implications:The findings also support the fact that geographic proximity, the absence of time difference and close cultural familiarity may help to disseminate investment opportunities and information.

Originality: The study contributes in by studding the volatility spillover over effect from developed countries to emerging countries by applying VAR-GARCH which was the missing link in literature.

Keywords:  Volatility Spillover, EuropeanMarkets, Emerging Seven Countries, VAR-GARCH Model JEL Classifications: F3, G00, G1, G14