An examination of the behavior of international stock market volatility

Abstract

In this paper, we investigate the relationship between cross-country stock investment and volatility spillovers abong five national stock markets; Japen, Korea, Taiwan, Thailand and U.S.. The empirical results provide new evidence that the ability to invest internationally seems to be a very important charnel through which volatility can be transmitted from one national stock market to another. Our results also suggest that the large scale transmission of volatility anong stock markets in October 1987 is likely to be related to unusually large pricing errors transmitted through cross-country stock investing rather than the arrival of fundamental news.