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Volatility and Information Linkages Across Markets and Countries

Volatility and Information Linkages Across Markets and Countries This study examines information and volatility linkages across the equity, money and bond markets within Australia and the US and across the two countries. These volatility linkages are due to common information and information spillovers caused by cross-market hedging. We employ a rational expectations framework in which information arrives randomly, causing volatility to be stochastic. The model imposes restrictions on the moments of returns which we estimate using GMM. We find that the model fits extremely well. The parameters are very stable across the various bivariate specifications. Cross-market linkages estimated using GMM are much stronger than those found with the commonly used proxies for volatility. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Australian Journal of Management SAGE

Volatility and Information Linkages Across Markets and Countries

Australian Journal of Management , Volume 28 (3): 22 – Dec 1, 2003

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Publisher
SAGE
Copyright
Copyright © by SAGE Publications
ISSN
0312-8962
eISSN
1327-2020
DOI
10.1177/031289620302800302
Publisher site
See Article on Publisher Site

Abstract

This study examines information and volatility linkages across the equity, money and bond markets within Australia and the US and across the two countries. These volatility linkages are due to common information and information spillovers caused by cross-market hedging. We employ a rational expectations framework in which information arrives randomly, causing volatility to be stochastic. The model imposes restrictions on the moments of returns which we estimate using GMM. We find that the model fits extremely well. The parameters are very stable across the various bivariate specifications. Cross-market linkages estimated using GMM are much stronger than those found with the commonly used proxies for volatility.

Journal

Australian Journal of ManagementSAGE

Published: Dec 1, 2003

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