Scandinavian Working Papers in Economics
Umeå Economic Studies,
Umeå University, Department of Economics
No 816: The Impact of Stock Market Jumps on Time-Varying Return Correlations: Empirical Evidence from the Baltic Countries
Jörgen Hellström () and Albina Soultanaeva ()
Additional contact information
Jörgen Hellström: Umeå School of Business, Umeå University, Postal: S 901 87 Umeå, Sweden
Albina Soultanaeva: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Abstract: In this paper we study the impact of market jumps on the time varying return correlations between stock market indices in the Baltic countries. An EARJI-EGARCH model facilitating direct modelling of the time varying return correlations is introduced. The empirical results indicate that there is a quite large number of identi…ed jumps in the emerging Baltic stock markets. The main …nding is that isolated market jumps in one of the markets generally have no or small e¤ects on the time-varying correlations. In contrast, simultaneous jumps of equal sign increase the average correlation, in some cases with as much as 100 percent.
Keywords: Correlated jumps; contagion
22 pages, December 21, 2010
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