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This study examines investor attention connectedness measures before and after the COVID-19 outbreak. We find that investor attention spillovers persist among global equity markets, and developed markets dominate as shock transmitters. The spillover effect increased significantly amidst the COVID-19 pandemic period due to escalating market turmoil. The empirical results suggest that investor attention interdependencies have important implications for improving our understanding of the shock transmission of global equity markets and co-movement dynamics. Our findings offer additional insights to investors and speculators to design better portfolio strategies by considering the net spillover effects of investor attention between numerous equity markets. [ABSTRACT FROM AUTHOR]

Systematic internalizers are single‐dealer platforms run by investment firms that trade out of their own inventories by internalizing the trades off exchanges. We analyze the determinants of dealers' market shares and trading costs. We find that dealer trades have lower price impacts than exchange trades, consistent with uninformed traders seeking out dealers. Due to their ability to avoid trading with informed investors, dealers often undercut the exchange bid–ask spread when the spread is wide and the tick size is not binding. Dealers can therefore offer lower trading costs and gain a higher market share relative to exchanges. [ABSTRACT FROM AUTHOR]

In this future directions in finance article, I discuss several topics that I believe are promising areas for research. The topics fall into three areas: the microstructure of fixed income markets, equity market microstructure, and short selling. Both theoretical and empirical work is needed in these areas. [ABSTRACT FROM AUTHOR]

This study examines the integration of Pakistan's Stock Market with the stock markets of the top ten largest economies in the world—USA, China, Japan, Germany, the UK, India, France, Italy, Brazil, and Canada—from January 2015 to October 2020. To examine long- and short run integration, this study employed Johansen and Juselius co-integration and pair-wise Granger causality tests. In the long run, the results indicated that Pakistan's Stock Market is not integrated with these markets. This implies that the market is more attractive in portfolio diversification for international investors, and vice versa. In the short run, the results revealed that, except for China, Pakistan's stock market integrates with the remaining nine markets. However, Pakistan's stock market exhibits a bidirectional relationship with the USA, Japan, Germany, the UK, and France in the lead-lag relationship. However, its relationship with India, Italy, Brazil, and Canada is unidirectional, with Pakistan's stock market leading, while these markets are following. For Pakistani investors, China is the optimal market, and vice versa. Importantly, our findings help policymakers to comprehend Pakistan's dynamic relationship with its trading partners. To the best of our knowledge, no prior study has employed advanced techniques to address the time-varying correlation among the selected markets. By determining Pakistan's stock market integration with its trading partners, this study aimed to fill this empirical literature gap.

The last two decades have witnessed major financial crises that led investors to seek alternative assets and investment strategies to reduce their portfolio risk. In this article, we provide information on the role of commodity futures in designing portfolios and managing risk based on an appealing operational framework. Using more than 20 years of sample data, we first investigate the conditional mean and volatility dynamics of equity and commodity futures markets within a dynamic conditional correlation model setup. We then form alternative equity‐commodity futures portfolios by changing the weights of commodity futures and examine if the diversified commodity‐equity portfolios perform superior to the all‐equity portfolios and four well‐known investment strategies that suit most practitioners. Stochastic dominance approach shows that including commodity futures in diversified portfolios does not always improve the risk‐return performance, except for gold in some particular portfolio setups. Accordingly, commodity assets have behaved like financial assets (stocks) and tend to be driven by the same pricing factors in general, which reduces the benefits of diversification. [ABSTRACT FROM AUTHOR]

Purpose – The study uses the multivariate GARCH-BEKK model (which was first proposed by Baba et al. (1990) and then further developed by Engle and Kroner (1995)) to examine the return and volatility spillover between India and four leading Asian (namely, China, Japan, Singapore and Hong Kong) and two global (namely, the United Kingdom and the United States) equity markets. Design/methodology/approach – The study employs a multivariate GARCH-BEKK model to quantify return correlation and volatility transmission across the pre- and post-2008 global financial crisis periods (apart from other conventional time series modelling like cointegration, Granger causality using vector error correction model (VECM)). Findings – The results show a tendency of the Indian stock market index to move along with the US and Hong Kong market indices. The decrease in the value of the co-integration coefficient during the recession was explained by reduced investor confidence in developing countries. The result further shows a clear distinction in terms of volatility spillover between the Asian market vis-a-vis US and UK markets. Volatility transmission from India to Asian markets was found to be significantly higher as compared to the US and UK. So also, the study’s results show a puzzling result giving us comparable co-integration ranks for phase 2 (expansion) and phase 3 (slow-down) of the business cycle in most cases. Research limitations/implications – In Granger causality testing, the results were unable to ascertain the difference between phase 2 (expansion) and phase 3 (slowdown). However, the multivariate GARCH (MGARCH)-BEKK model showed a clear reduction in volatility transmission to NIFTY50 (is the flagship index on the National Stock Exchange of India Ltd. (NSE)) as India entered slow-down. This shows that the Indian economy does go through different business cycles, and the changes in parameters hence prove hypothesis 3 to be true with respect to volatility transmission to India from International markets. Originality/value – The results show that for all countries, the volatility transmitted to India increases significantly going from phase 1 (recession) to phase 2 (expansion) and reduces again once the countries enter slow-down in phase 3 (slowdown). This shows that during expansion shocks and impulses in international markets affect the Indian markets significantly, supporting the increase in co-integration in phase 2 (expansion). During expansion, developing markets like India become profitable for investors, due to the high growth rate when compared to developed countries. This implies that a significant amount of capital enters Indian markets, which is susceptible to the volatility of international markets. The volatility transmission from India to the US and UK was insignificant in phase 1 (recession and recovery) and phase 3 (slow-down) showing a weak linkage between the markets during volatile time periods.

'Environment, Social and Governance' (ESG) considerations have received increasing attention as components that inform responsible investments in mining and global material supply. In ESG, governance variables have been mostly regarded as internal firm structures and broad national institutional strength, neglecting closer observations on economic regulation and national raw material politics. Improved governance data to support ESG evaluations should include historical and current relations between public governance bodies and private-sector firms. This paper examines the role of competition regulation agencies in weighing out and mediating relations between the State and multinational private-sector mining firms to unpack components that affect governance in mining. It does so by commenting on empirical data of the purchase held in 2018 of SQM shares—the world's second largest lithium raw materials supplier—by Tianqi Lithium—one of the largest lithium materials producers in China. The paper discusses the place of equity markets in politics of nation-making and economic regulation in mining. It argues that beyond internal corporate structures, the governance criteria in the ESG profile of mining companies are largely affected by domestic economic regulation maturity, domestic political geography histories of private equity and imageries of corporate shares and natural resources. Furthermore, this paper argues that the effective governance of lithium supply in Chile is affected by political tensions between economic regulation and contractual regimes in mining. [ABSTRACT FROM AUTHOR]

The purpose of this study is to investigate the relationship between investor sentiment and leading equity market indices from the U.S., Europe, Asia, and globally between January 2020 and June 2022. The methodological approaches utilized are quantile regression and wavelet analysis. The results of quantile regression suggested that Google Search Volume (GSV) and Twitter-based Market Uncertainty Index (TMU) negatively influenced the equity indices at lower quantiles. The wavelet coherence analysis highlighted that, at lower frequency bands, GSV moves in sync with the S&P 500, NASDAQ Composite, Dow Jones Industrials, and FTSE 100 but not with the DAX, CAC 40, TOPIX, Nikkei 225, or MSCI. Nonetheless, when the TMU was used to measure investors’ sentiment, the results revealed that the whole series was out of phase. [ABSTRACT FROM AUTHOR]

The purpose of this study is to investigate the relationship between investor sentiment and leading equity market indices from the U.S., Europe, Asia, and globally between January 2020 and June 2022. The methodological approaches utilized are quantile regression and wavelet analysis. The results of quantile regression suggested that Google Search Volume (GSV) and Twitter-based Market Uncertainty Index (TMU) negatively influenced the equity indices at lower quantiles. The wavelet coherence analysis highlighted that, at lower frequency bands, GSV moves in sync with the S&P 500, NASDAQ Composite, Dow Jones Industrials, and FTSE 100 but not with the DAX, CAC 40, TOPIX, Nikkei 225, or MSCI. Nonetheless, when the TMU was used to measure investors’ sentiment, the results revealed that the whole series was out of phase.

Stock trades pass through several phases before completion, from placing an order via a brokerage firm, to the delivery of securities versus payment. This paper sheds light on the later phases of the trading process for equity securities in USA capital markets. In a continuous effort to improve the settlement process, the National Securities Clearing Corporation makes several substantial changes every year to the rules and regulations that govern the settlement process. This paper investigates the impact of rule changes on the efficiency of settlement, based on the volume of shares that failed to deliver from 2004 to 2017. The rule changes are modeled with a dummy variable in a vector autoregressive (VAR) model, where the quantity of fails and market returns are both included in the VAR model as endogenous variables. The results show a considerable impact of rule and regulation changes on the quantity of shares failed to be delivered in time for settlement; especially, the regulations implemented to improve short selling had a statistically significant impact on reducing settlement failures and improving market returns. The finding of this study provides important information for regulators and investors with regard to the settlement process and investment strategies.

This article examines the consequences of the COVID‐19 crisis on the interdependencies between emerging and advanced economies. Using daily market index data from 22 developed and emerging markets, we develop a combination of statistical methods based on Diebold and Yilmaz spillover index and Toda–Yamamoto and Dolado and Lütkepohl causality approach. The results substantiate an increase in the interdependence between emerging and advances economies, which suggests an increase in the transmission of the stress and uncertainty between financial markets during the pandemic period. Our findings show that the emerging countries are affected by the financial markets of advanced economies during the COVID‐19 crisis and, in particular, by European markets, which appear to be the primary driver of contagion and transmission of stress and uncertainty to all other regional markets. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is to explore whether the out-of-sample model bias plays an important role in predicting volatility. Design/methodology/approach: Under the heterogeneous autoregressive realized volatility (HAR-RV) framework, we analyze the predictive power of out-of-sample model bias for the realized volatility (RV) of the Dow Jones Industrial Average (DJI) and the S&P 500 (SPX) indices from in-sample and out-of-sample perspectives respectively. Findings: The in-sample results reveal that the prediction model including the model bias can obtain bigger R2, and the out-of-sample empirical results based on several evaluation methods suggest that the prediction model incorporating model bias can improve forecast accuracy for the RV of the DJI and the SPX indices. That is, model bias can enhance the predictability of original HAR family models. Originality/value: The author introduce out-of-sample model bias into HAR family models to enhance model capability in predicting realized volatility. [ABSTRACT FROM AUTHOR]

Purpose – The authors aim to examine the mean and volatility linkages between the gold market and the Latin American equity markets in the entire sample period and two crises periods, namely the US financial crisis and the Chinese crash. Design/methodology/approach – To examine the return and volatility spillovers, the authors employ VAR-BEKK-GARCH model on the daily data of four emerging Latin American equity markets which include Peru, Chile, Brazil and Mexico, which ranges from January 2000 to June 2018. Findings – The results show that the return transmissions vary across the stock markets and the crises periods. The volatility transmission is found to be bidirectional between the gold and stock markets of Brazil and Chile during the US financial crisis. Furthermore, the volatility spillover is unidirectional from Brazil to gold and from gold to Peru stock market during the Chinese crash. We also calculate the optimal weights hedge ratios for gold and stock portfolio. The result suggests that portfolio managers need to increase the weight of gold for the equity portfolios of Peru and Mexico during the US financial crisis. Furthermore, during the Chinese crisis, investors may raise the investment in gold for the equity portfolios of Brazil and Chile. Finally, the cheapest hedging strategy is CHIL/GOLD during the US financial crisis, whereas MEXI/GOLD during the Chinese crash. Practical implications – These findings have useful insights for portfolio diversification, asset pricing and risk management. Originality/value – The study's outcome provides policymakers and investors with in-depth insights regarding hedging, risk management and portfolio management.

Like no other calamitous event in recent memory, the COVID-19 pandemic has plunged the world’s financial system into disarray, triggering systemic risk spillovers across markets. In this study, we use 5-minute index futures price data to examine the multiscale interdependence structure of global equity, gold, and oil markets prior to and following the COVID-19 outbreak, in terms of the first four realized moments of their respective return distributions (i.e., mean, variance, skewness, and kurtosis). With respect to the equity-gold nexus, we find that stock (gold) returns and volatility negatively (positively) lead their gold (stock) counterparts at medium- and long-term scales in the pandemic period, while asymmetry risk in stock markets positively leads its counterpart in gold markets at the same scales before and during the early months of the health crisis. Concerning the oil-equity nexus, our results reveal a positive (negative) co-movement between asymmetry risks at short- and medium-term scales in January-April (May-July) 2020, whereas heavy tail risks are positively synchronized at low frequencies in the turbulent period of March-April 2020. Some policy implications are derived from the analysis.

This study investigates the price discovery role of exchange-traded funds (ETFs) by examining the predictive relation between the returns of emerging market ETFs traded in the US and the returns to the aggregate equity indices that they track. In a sample that covers 18 countries, we find that ETF returns can predict one-day-ahead returns of their underlying indices. This relation is robust after controlling for the non-synchronicity between markets, serial correlation in index returns, and various determinants of aggregate returns. Moreover, the predictive relation is more pronounced during periods of higher volatility and evidence for bidirectional spillover effects is weak. We also find that an out-of-sample rolling window strategy outperforms investing in the market index several-fold in the majority of the markets, especially in the high-volatility subsample. [ABSTRACT FROM AUTHOR]

Stock trades pass through several phases before completion, from placing an order via a brokerage firm, to the delivery of securities versus payment. This paper sheds light on the later phases of the trading process for equity securities in USA capital markets. In a continuous effort to improve the settlement process, the National Securities Clearing Corporation makes several substantial changes every year to the rules and regulations that govern the settlement process. This paper investigates the impact of rule changes on the efficiency of settlement, based on the volume of shares that failed to deliver from 2004 to 2017. The rule changes are modeled with a dummy variable in a vector autoregressive (VAR) model, where the quantity of fails and market returns are both included in the VAR model as endogenous variables. The results show a considerable impact of rule and regulation changes on the quantity of shares failed to be delivered in time for settlement; especially, the regulations implemented to improve short selling had a statistically significant impact on reducing settlement failures and improving market returns. The finding of this study provides important information for regulators and investors with regard to the settlement process and investment strategies. [ABSTRACT FROM AUTHOR]

This research study evaluates the impact of the Covid 19 pandemics on the downside risk-return volatilities across the four stock markets of the USA, UK, China, and Pakistan. The pandemic results in severe economic and financial consequences both at micro and macro levels as well as across the stock markets of various countries. The selected stock markets of the USA, UK, Pakistan, and China are significantly affected in terms of both investor risk and return during the pandemic time. The entire period distribution of the risk exhibited the downside risk behavior of both markets and investors' serious concern regarding their investment strategies. Using high-frequency data from January 2020 to April 2021, the findings of the study reveal more of the downside abnormal returns across both markets. The impact is larger and high in developed markets of USA and UK compared to the emerging markets of China and Pakistan. The outcomes of the various value-at-risk models disclose the higher downside risk implications for all markets, larger for developed countries. Similarly, the three stock markets of the USA, UK, and China were found to be significantly connected during a pandemic. Investors' reactions were positive and high in case of positive news outbreaks and dwindling in case of negative news and downside impact. The outcomes of the study are useful for investors, portfolio managers, investment advisors, and others to understand the dynamics of the pandemic situation and devise effective strategies to overcome the severities of downside risk. [ABSTRACT FROM AUTHOR]

With the use of empirical data, this paper focuses on solving financial and investment issues involving extremal dependence of 10 pairwise combinations of the 5 BRICS (Brazil, Russia, India, China, and South Africa) stock markets. Daily closing equity indices from 5 January 2010 to 6 August 2018 are used in the study. Unlike previous literature, we use bivariate point process and conditional multivariate extreme value models to investigate the extremal dependence of the stock market returns. However, it is observed that the point process was able to model many more extreme observations or exceedances that contribute to the likelihood estimation. It gives more information than the threshold excess method of the CMEV model. This study shows varying levels of low extremal dependence structure whose outcomes are highly beneficial to investors, portfolio managers and other market participants interested in maximising investment returns and financial gains. [ABSTRACT FROM AUTHOR]

This paper investigates the transmission of shocks during the period of the withdrawal of the United Kingdom from the European Union (BREXIT) across twenty-two equity markets. We use an augmented multifactor model to detect the transmission of contagion effects from the United States and Western Europe to Brazil, Russia, India, China and South Africa, commonly known as 'the BRICS' countries, during BREXIT, i.e. the exit of Great Britain from the European Union. Our model captures the unexpected returns and disentangles the simple correlations due to fundamentals and contagion. Our results show that crisis did not have the same effects on the BRICS countries in terms of contamination. More precisely, evidence of fundamental contagion is documented between stock markets. Moreover, Russia was the most contaminated market, and China was the least affected market. Furthermore, the findings prove that the stock market contagion between these countries was transmitted by some channels that have been omitted from the theory. [ABSTRACT FROM AUTHOR]

The US net foreign asset position has deteriorated sharply since 2007 and is currently negative 65 percent of US GDP. This deterioration primarily reflects changes in the relative values of large gross international equity positions, as opposed to net new borrowing. In particular, a sharp increase in equity prices that has been US-specific has inflated the value of US foreign liabilities. We develop an international macro finance model to interpret these trends, and we argue that the rise in equity prices in the United States likely reflects rising profitability of domestic firms rather than a substantial accumulation of unmeasured capital by those firms. Under that interpretation, the revaluation effects that have driven down the US net foreign asset position are associated with large, unanticipated transfers of US output to foreign investors. [ABSTRACT FROM AUTHOR]

This study examined the co-movement of ASEAN stock markets, COVID-19 cases/deaths, and the United States (US) stock market using wavelet coherence analysis. The findings revealed that the US stock market remained significantly dominant and was more influential to the ASEAN market. Nevertheless, coherence between the ASEAN stock markets and COVID-19 cases/deaths were also found but was limited during the crisis, and the impact of the number of deaths was lower than the number of cases. The results presented a significant disparity in the co-movements of each country. Such a phenomenon is expected as individual countries' economies tend to be more divergent during crises. Through wavelet analysis, the irregularity and uncertainty of co-movements can be detected more clearly and accurately with the interpretation of a heatmap. [ABSTRACT FROM AUTHOR]

Using the multivariate quantile autoregression technique, we examine how equity returns of Islamic and conventional banks are affected by shocks to major financial indices such as the DJUSI index, the MSCI World Index, the VIX index and the United States 10-years Treasury bond interest rate. We compare the stability of the two banking systems to financial risk spillovers at the global and regional levels based on data from 16 countries for the period after the 2008 crisis. The empirical findings suggest that Islamic banks' equities have weaker codependency with major equity markets than conventional banks at the global level while Islamic banks' codependency with the 10-years US Treasury bond rate tends to be stronger than conventional banks indicating the sensitivity of Islamic banks to global interest rates. The empirical results also reveal that there does not seem to be any significant difference between stock price reactions of Islamic and conventional banks both at the regional and global levels in response to shocks to major financial indices. Regarding regional comparison of Islamic banks only, we find that Islamic bank performance does not vary much across heterogeneous geographic regions. [ABSTRACT FROM AUTHOR]

Günümüzde gelişmiş ülkelerdeki fon yatırımcıları hem portföy çeşitlendirmesi hem de risk yönetimi açısından fonlarını aktaracak düşük korelasyonlu yatırım araçları ve finansal piyasa arayışına girmiştir. Bilginin finansal piyasalar arasındaki hızlı yolculuğu piyasalardaki dalgalanmaların şiddetlenmesine ve böylelikle olası finansal krizlerin daha hızlı bir şekilde diğer ülkelere bulaşmasına sebep olmaktadır. Gelişmiş ve gelişmekte olan ülkeler arasındaki getiri ve volatilite yayımlarının tespit edilmeye çalışıldığı bu araştırmada 02.01.2006-15.09.2017 dönemleri aralığındaki günlük veriler kullanılmıştır. Kurulan çok değişkenli VAR-EGARCH modeli ortalama denklemi sonuçlarına göre; ABD başta olmak üzere İngiltere ve Japonya pay piyasalarından örnekleme dahil edilen tüm gelişmekte olan ülkelere doğru güçlü bir getiri yayılımın olduğu, volatilite yayılımı açısından ise bu ülkeler üzerinde Fransa ve İngiltere’nin daha baskın olduğu tespit edilmiştir. Diğer bir taraftan gelişmiş ülke pay piyasalarında oluşan bir hareketlilikten en çok etkilenen piyasanın Endonezya pay piyasası, en az etkilenen piyasanın ise Güney Afrika pay piyasası olduğu bulgusu elde edilmiştir. Gelişmekte olan ülkeler arasında kurulan çok değişkenli VAR-EGARCH model sonuçlarına göre getiri yayılımı açısından ülkeler arasında çok yönlü öncül/ardıl ilişkilerinin olduğu gözlemlenmiştir. Volatilite yayılımı açısından bakıldığında ise Türkiye dışındaki dört ülkeye ait pay piyasaları arasında dikkate değer bir volatilite etkileşimi görülürken Türkiye’nin diğer ülkelerde oluşan volatilite akımlarından en az etkilenen ülke olduğu görülmüştür.

This paper examines the extent of integration of the Baltic stock markets with the financial markets in Western Europe. The long‐run relationships between the stock markets of the Baltic States and selected developed stock markets are studied by means of cointegration analysis on the weekly returns. For the Baltic stock markets and key indices from the European markets, the empirical results over period 2005–2015 provide clear evidence that the Baltic stock markets are integrated with the Swedish stock market, and that this cointegrating relationship implies transmission of shocks from Sweden to the Baltic States. The cointegration analysis is also conducted for rolling windows over consequent sub‐samples, which only verifies the robustness of the integration between the stock markets of the Baltic States and Sweden. Given that there is no support for the long‐term relationships between the Baltic market and euro area, it may be that Baltic markets offer diversification benefits for the euro area indices. [ABSTRACT FROM AUTHOR]

Like no other calamitous event in recent memory, the COVID-19 pandemic has plunged the world's financial system into disarray, triggering systemic risk spillovers across markets. In this study, we use 5-minute index futures price data to examine the multiscale interdependence structure of global equity, gold, and oil markets prior to and following the COVID-19 outbreak, in terms of the first four realized moments of their respective return distributions (i.e., mean, variance, skewness, and kurtosis). With respect to the equity-gold nexus, we find that stock (gold) returns and volatility negatively (positively) lead their gold (stock) counterparts at medium- and long-term scales in the pandemic period, while asymmetry risk in stock markets positively leads its counterpart in gold markets at the same scales before and during the early months of the health crisis. Concerning the oil-equity nexus, our results reveal a positive (negative) co-movement between asymmetry risks at short- and medium-term scales in January-April (May-July) 2020, whereas heavy tail risks are positively synchronized at low frequencies in the turbulent period of March-April 2020. Some policy implications are derived from the analysis. [ABSTRACT FROM AUTHOR]

This research aims to look into the effect of COVID-19 on emerging stock markets in seven of the Association of Southeast Asian Nations' (ASEAN-7) member countries from March 21, 2020 to April 31, 2020. This paper uses a ST-HAR-type Bayesian posterior model and it highlights the stock market of this ongoing crisis, such as, COVID-19 outbreak in all countries and related industries. The empirical results shown a clear evidence of a transition during COVID-19 crisis regime, also crisis intensity and timing differences. The most negatively impacted industries were health care and consumer services due to the Covid-19 drug-race and international travel restrictions. More so, study results estimated that only a small number of sectors are affected by COVID-19 fear including health care, consumer services, utilities, and technology, significance at the 1%, 5%, and 10%, that measure current volatility's reliance on weekly and monthly variables. Secondly, it is found that there is almost no chance that the COVID-19 pandemic would positively affect the stock market performance in all the countries, mainly Indonesia and Singapore were the countries most affected. Thirdly, results shown that Thailand's stock market output has dropped by 15%. Results shows that COVID-19 fear causes an eventual reason of public attention towards stock market volatility. The study presented comprehensive way forwards to stabilize movement of ASEAN equity market's volatility index and guided the policy implications to key stakeholders that can better help to mitigate drastic impacts of COVID-19 fear on the performance of equity markets. [ABSTRACT FROM AUTHOR]

This study examines the static and dynamic correlations in the ASEAN equity markets. The importance of this research appears from the fact that practitioners can get the benefit if their investments yield the same or higher returns given lower or the same risk in their portfolio. Firstly, this advantage comes from including the assets that decrease volatility of the portfolio. Hence, the correlation between the ASEAN markets should be examined. Secondly, co-movements in market realizations may increase global financial instability. Its existence is important for international investors, financial institutions, and policy makers. The study locates the relationship between ASEAN and its major trading partners, including Japanese, US, and UK markets, in order to find more rational results. This study utilizes alternative multivariate GARCH forms to provide useful information on the dynamic evolution and implications of return volatilities. The results show that the volatilities of all the equity markets under study are persistent over time. The estimates from VEC model indicate that the movements of the US and UK equity market returns have some degree of influence on several of the ASEAN equity markets. The results imply that, first, most of the developing ASEAN equity markets work by its own information with small relation to the developed world. Second, it is still convincing to state that investing in ASEAN equity markets should provide investors a better mean-variance portfolio. And, third, buy-and-hold strategy seems to be more beneficial than readjusting the ASEAN equities portfolio.

The study used the Markov regime switching model to investigate the presence of regimes in the volatility dynamics of the returns of JSE All-Share Index (ALSI). Volatility regimes are as a result of sudden changes in the underlying economy generating the market returns. In all, twelve candidate models were fitted to the data. Estimates from the regime switching model were compared to the industry standard non-switching GARCH (1,1) using the Deviance Information Criteria (DIC). The results show that the two-regime switching EGARCH model with skewed Student t innovations describes better the return of the JSE Index. Additionally, we backtest the model results in order to confirm our findings that the two-regime switching EGARCH is the best of the models for the sample period.