The efforts are made in this study to examine the integration of a set of nine emerging equity markets under risk and uncertainty for a period from January 2000 to December 2014. The research methodology applied in the study includes application of Ljung–Box (L–B) test to examine the cross-correlation in stock returns, GARCH(1,1)-in-mean model for the estimation of volatility, and further L–B as a diagnostic testing of fitted model, and finally correlations to examine the integration of these markets in terms of stock returns and volatility. The L–B statistics suggests the presence of autocorrelation, which signifies volatility clustering in stock returns of all stock markets in questions. The findings report a significant integration between expected and unexpected volatilities between all the stock markets. The so obtained results bring out the important element of investment strategy. Investors across the markets respond in the same line with the emergence of global expected and unexpected economic and non-economic shocks and they will not be able to make extra returns by diversifying their funds in the long run.
AggarwalR.InclanC.LealR. (1999). Volatility in emerging markets. Journal of Financial and Quantitative Analysis, 34(1), 33–55.
2.
BalabanE.BayarA.KanO.B. (2001). Stock returns, seasonality and asymmetric conditional volatility in world equity markets. Applied Economic Letters, 8(4), 263–268.
3.
BekaertG.HarveyC.R. (2000). Foreign speculator and emerging equity markets. Journal of Finance, 55(2), 565–613.
4.
BekaertG.HarveyC.R.LundbladC.T. (2001). Emerging equity markets and economic development. Journal of Development Economics, 66(2), 465–504.
5.
BollerslevT.ChouR.Y.KronerK.F. (1992). ARCH modeling in finance: A review of the theory and empirical evidence. Journal of Econometrics, 52(1), 5–59.
6.
BrackerK.DockingD.S.KochP.D. (1999). Economic determinates of evolution in international stock market integration. Journal of Empirical Finance, 6(1), 1–27.
7.
CheungC.S.LeeJ. (1993). Integration vs. segmentation in the Korean stock market. Journal of Business, Finance and Accounting, 20(2), 267–273.
8.
CheungY.L.MakS.C. (1992). A study of the international transmission of stock market fluctuation between the developed markets and Asian Pacific market.Applied Financial Economics, 2(1), 43–47.
9.
ChiangT.C.DoongS.C. (2001). Empirical analysis of stock returns and volatility: Evidence from seven Asian stock markets based on TAR-GARCH model. Review of Quantitative Finance and Accounting, 17(3), 301–318.
10.
DarratF.Ali ZhongM. (2001). Equity market integration and multinational trade agreements: The case of NAFTA. Presentation to the 2001 Annual Meeting of Financial Management Association International, Toronto, Canada, 17October.
11.
EdwardsS.SusmelR. (2001). Volatility dependence and contagion in emerging markets. Journal of Development Economics, 66(2), 502–532.
12.
EngleR.F. (1982). Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation. Econometrica, 50(4), 987–1007.
13.
EwingT.BradleyJamesPayneE.ChiffordSowell (1999). NAFTA and North American stock market linkages: An empirical note. North American Journal of Economics and Finance, 10(2), 443–451.
14.
FaffW.F.MckenzieM.D. (2007). The relationship between implied volatility and autocorrelation. International Journal of Managerial Finance, 3(2), 191–196.
15.
ForbesK.J.RigobonR. (2002). No contagion, only interdependence: Measuring stock market comovements. Journal of Finance, 57(2), 2223–2261.
16.
Frankde JongFransRoon de (2001). Time varying market integration and expected returns in emerging markets. Discussion Paper Series: Centre for Economic Policy Research, London, December.
17.
FrenchK.R.SchwertG.W.StambaughR.F. (1987). Expected stock returns and volatility. Journal of Financial Economics, 19(1), 3–29.
18.
FujiiE. (2005). Intra and inter-regional causal linkages of emerging stock markets: Evidence from Asia and Latin America in and out of crises. Journal of International Financial Markets, Institutions and Money, 15(4), 315–342.
19.
JohnsonR.A.SoenenL. (2003). Economic integration and stock market co-movement in the Americas. Journal of Multinational Financial Management, 13(1), 85–100.
20.
KarolyiG.A.StulzR.M. (1996). Why do markets move together? An investigation of US-Japan stock return co-movements. Journal of Finance, 51(3), 951–986.
21.
KhanS.ParkK.W.K. (2009). Contagion in the stock markets: The Asian financial crisis revisited. Journal of Asian Economics, 20(5), 561–569.
22.
KingM.SentaraE.WadhwaniS. (1994). Volatility and links between national stock markets. Econometrica, 62(4), 901–933.
23.
KingM.WadhwaniS. (1990). Transmission of volatility between stock markets. Review of Financial Studies, 3(1), 5–33.
KumarRakeshDhankarRaj S. (2009). Asymmetric volatility and cross correlation in stock returns under risk and uncertainty. Vikalpa, 34(4), 25–36.
26.
KumarRakeshDhankarRaj S. (2010). Empirical analysis of conditional heteroskedasticity in time series of stock returns and asymmetric effect on volatility. Global Business Review, 11(1), 21–33.
27.
KumarRakeshDhankarRaj S. (2011). Non linearity and heteroskedasticity effect on stock returns: A study of U.S. stock market. Global Business Review, 12(2), 319–329.
28.
KumarRakeshDhankarRaj S. (2012). Empirical analysis of the causality between Indian and U.S. stock markets’ conditional volatility: Some further evidence. Capital Markets Review, 20(1), 65–76.
29.
KumarRakeshTamimiM. (2011). Impact of crude oil price volatility on world equity markets behaviour. Journal of Applied Research in Finance, 3(2), 236–248.
30.
LiuS.Z.LinK.C.LaiS.M. (2006). Stock market interdependence and trade relations: A correlation test for the U.S. and its trading partners. Economics Bulletin, 7(5), 1–15.
31.
MasihAbul M.M.MasihR. (2001). Long and short term dynamic causal transmission among international stock markets. Journal of International Money and Finance, 20(4), 563–587.
32.
McClureG. KennethClaytonRonnieHoflerRichard A. (1999). International capital structure differences among G7 nations: A current empirical view. The European Journal of Finance, 5(2), 141–164.
33.
SasakiH.SatoshiYamaguchiTakamasaH. (1999). The globalization of financial markets and monetary policy. Paper Presented in the Bank for International Settlements, Annual Autumn Meeting, 25–26October, Basel, Switzerland.
34.
SchwertG.W. (1990). Stock volatility and the crash of 87. Review of Financial Studies, 3(1), 77–102.
35.
WuthisatianR. (2014). Cointegration of stock markets the case of Thailand. Review of Market Integration, 6(3), 297–320.
