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Illiquidity, return and risk in G7 stock markets: Interdependencies and spillovers
- Source :
- International Review of Financial Analysis. 35:118-127
- Publication Year :
- 2014
- Publisher :
- Elsevier BV, 2014.
-
Abstract
- Trading activity in G7 stock markets reflects not only the macroeconomic and financial impact of these G7 economies in international economic growth, but also their financial interdependence. While this nexus of major stock markets has been explored in terms of volatility and return spillovers, there has been no combined analysis of return, volatility and illiquidity spillovers. We study illiquidity spillovers because they are transmissions of trading activity and, thereof, transmissions of information and market sentiment. We find that the dynamics of international stock markets are characterized by persistent illiquidity and also that illiquidity shocks are significantly correlated across markets. Furthermore, we discover Granger causal associations between risk, return and illiquidity across G7 stock market and also within each stock market. Our findings bear significance for the regulation of international financial markets and also for international portfolio diversification.
- Subjects :
- Economics and Econometrics
Financial impact
Financial economics
media_common.quotation_subject
Financial market
Illiquidity spillovers
return spillovers
volatility spillovers
VAR
G7 stock markets
Interdependence
jel:G15
Economics
Stock market
Market sentiment
Volatility (finance)
Capital market
Finance
Stock (geology)
media_common
Subjects
Details
- ISSN :
- 10575219
- Volume :
- 35
- Database :
- OpenAIRE
- Journal :
- International Review of Financial Analysis
- Accession number :
- edsair.doi.dedup.....53ce2224f245e8dd60a4dfd18374b54d