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Review of Economic Perspectives

Národohospodárský obzor; The Journal of Masaryk University

4 Issues per year


SCImago Journal Rank (SJR) 2015: 0.143
Source Normalized Impact per Paper (SNIP) 2015: 0.273
Impact per Publication (IPP) 2015: 0.121

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Online
ISSN
1804-1663
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Volume 13, Issue 1 (Mar 2013)

Issues

To What Extent are Stock Returns Driven by Mean and Volatility Spillover Effects? – Evidence from Eight European Stock Markets

Abdulla Alikhanov
  • Lund University, Department of Economics, P.O. Box 7082 S-220 07 Lund, Sweden
  • Email:
Published Online: 2013-04-20 | DOI: https://doi.org/10.2478/v10135-012-0013-7

Abstract

The paper investigates mean and volatility spillover effects from the U.S and EU stock markets as well as oil price market into national stock markets of eight European countries. The study finds strong indication of volatility spillover effects from the US-global, EU-regional, and the world factor oil towards individual stock markets. While both mean and volatility spillover transmissions from the US are found to be significant, EU mean spillover effects are negligible. To evaluate the magnitude of volatility spillovers, the variance ratios are also computed and the results draw to attention that the individual emerging countries’ stock returns are mostly influenced by the U.S volatility spillovers rather than EU or oil markets. Additionally, examination of only global and regional stock markets spillover transmissions into European stock markets also confirms the dominating presence of the U.S spillover transmissions. Furthermore, I also implement asymmetric tests on stock returns of eight markets. The stock market returns of Hungary, Poland, Russia and the Ukraine are found to respond asymmetrically to negative and positive shocks in the US stock returns. The weak evidence of asymmetric effects with respect to oil market shocks is found only in the case of Russia and the quantified variance ratios indicate that presence of oil market shocks are relatively higher for Russia. Moreover, a model with dummy variable confirms the effect of European Union enlargement on stock returns only for Romania. Finally, a conditional model suggests that the spillover effects are partially explained by instrumental macroeconomic variables, out of which exchange rate fluctuations play the key role in explaining the spillover parameters rather than total trade to GDP ratios in most investigated countries.

Keywords: Stock markets; the U.S; E.U; volatility spillovers; emerging markets; mean; oil price; exchange rates; asymmetric effects

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About the article

The author would like to thank Frederik Lundtofte and Lu Liu for helpful comments and suggestions


Published Online: 2013-04-20

Published in Print: 2013-03-01


Citation Information: Review of Economic Perspectives, ISSN (Online) 1804-1663, ISSN (Print) 1213-2446, DOI: https://doi.org/10.2478/v10135-012-0013-7. Export Citation

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