Kedreth Hogan

Characterizing World Market Integration through Time

International asset pricing models suggest that barriers to portfolio flows and availability of market substitutes affect the degree and time variation of world market integration. We use GARCH-in-mean methodology to assess the evolution in market integration for eight emerging markets over the period 1977–2000. Our results suggest that while local risk is still a relevant factor in explaining time variation of emerging market returns, none of the countries appear to be completely segmented. We find that there are substantial crossmarket differences in the degree of integration. The evolution toward more integrated financial markets is apparent although at times we do observe reversals. In addition, we provide clear evidence on the impropriety of directly using correlations of market-wide index returns as a measure of market integration. Finally, financial market development and financial liberalization policies play important roles in integrating emerging markets.

Macroeconomic Determinants of European Stock Market Volatility

In this paper we investigate whether macroeconomic variability can explain time variation in European stock market volatility. We find that unlike the documented case of the USA, in many cases, the time variation in stock market volatility is found to be significantly affected by the past variability of either monetary or real macroeconomic factors. Our findings have important implications for capital and portfolio allocations.

Behavior of international stock return distributions: A simple test of functional form

Abstract We employ a simple criterion, called kappa, to classify global return distributions according to their Pearson types. This classification allows us to rule out a priori several candidate distributions which have been suggested in the literature. Our results show that for some countries, the log-normal distribution can be ruled out a priori. Furthermore, we find important systematic differences between developed and emerging market returns distributions. However, we find that these differences have diminished over time.