StudentShare solutions
Triangle menu

International comparisons of stock market volatility - Essay Example

Nobody downloaded yet

Extract of sample
International comparisons of stock market volatility

Even researchers and practitioners have made modeling of stock volatility a subject of empirical and theoretical study. Historically, stock market volatility is approximately 20% per annum and 5.8% per month even though periods of high and low volatilities are experienced. During the financial crisis, there was a 50 percent drop in stock prices. The effects of the crisis are still being felt due to increased public and private debt, levels of unemployment and global capitalism. The governments are doing their best to prevent and contain the situation buy formulating new policies and reforming major sectors. Volatility measures the degree of variability between stock prices. In other words, it determines the degree of deviation between the current price of an asset and the average past price. To understand volatility, it is important to take a look at the nature and trends of global markets and the correlation of the stock market returns. For many investors, volatility is a risk, thus, it is to be taken into consideration in analyzing their portfolios. Some of the factors that lead to volatility include changes in technology, new financial instruments such as derivatives and the increased integration of global markets. Volatility is measurable, and the commonly used measure is Chicago Board Options Exchange Index (CBOE) of implied (VIX) volatility. In this paper, we will use a sample of 19 emerging markets economies (EMEs) and developed market in Europe, Latin America, Middle East and Asia as a basis of comparison on the stock market’s volatility. Most of the previous research papers focused on regional and local stock markets but due to the national integration that is linking markets globally, we use will compare countries from different continents (Beirne et al 2008). Nature of stock markets in emerging and developed markets Global markets consist of emerging and developed stock markets. A few studies have been done to examine the characteristics of emerging markets. According to these studies, emerging markets are characterized by higher average returns, low correlations with developed markets, higher volatility and more predictability of returns (Chukwuogor 2008). Their main argument was that volatility in emerging markets is high and difficult especially in the segmented markets. Segmented markets are influenced by local factors. Their returns tend to be skewed and highly non-normally distributed. Volatility in emerging markets has been declining following capital market capitalization. The correlation in emerging markets is quite higher than in the developed markets due to lack of diversification and trading depths (Chukwuogor 2008). The volatility in these markets is highly influenced by social, political, economic factors. Data and methodology The studies also focused only on the emerging markets and not developed markets. We will use daily returns and volatilities of such returns for the 19 countries using data from 2001 to 2009. We use the GARCH model to determine the means and variances of stock returns in these countries. The Standard and Poor (S & P) index is used to rank the countries. Below is a table showing the emerging and developed markets. TABLE 1 Country Index USA S&P 500 UK FTSE 100 France CAC 40 Germany DAX 30 Xetra Australia All Ordinaries China/Hong kong Hang Seng Singapore Strait Times Malaysia Kuala Lumpur Composite Thailand stock exchange of Thailand China Shanghai ...Show more


International comparisons of stock market volatility Introduction The 2007/2008 global economic crises made the financial markets respond to the contagion effect. Contagion effect implies that when one sector fails due to some reasons, the impact will also be felt by other sectors…
Author : osbaldo46
International comparisons of stock market volatility essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"International comparisons of stock market volatility"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Stock Market
GOLD - Randgold Resources Ltd. These companies represent a diversified trading strategy with stocks in the consumer retail sector focusing on small business and home enterprise growth in a recovery economy, Chinese biotechnology for rapid growth potential, the NASDAQ giant and tech-sector leader Apple with the dynamic iPhone, iPad, and iOS lines internationally, and one of the largest miners in the world in Randgold.
4 pages (1000 words) Essay
Stock Market
Name: Instructor: Course: Date: Stock market summary essay Introduction This essay seeks to relay to the reader a comprehensive summary of a stock market case. The case involves an investor who has $1 million and seeks to invest in various stocks of his choice.
2 pages (500 words) Essay
Stock market
The stock market can be very profitable but can also lead to losses. The stock market is very profitable creating a lot of interest to many people and though it may result in losses, there is a lot of benefit to the institutions selling their stocks, the individual that buy it and the governments of the various countries, making it one of the most popular earners.
3 pages (750 words) Essay
UAE stock market
The stocks were exchanged by the unofficial and unlicensed trade offices. The stock market was still not full-fledged developed but trading of shares was started by the unofficial proceedings. In the deficiency of suitable mechanisms, transparency and controls, the element of fairness was absent.
3 pages (750 words) Essay
Stock market
Commodities are traded in commodities markets, with derivatives are traded in a diversity of markets. The size of the worldwide 'bond market' is estimated at $45 trillion. The size of the 'stock market' is estimated at about $51 trillion. The world derivatives market has been estimated at about $480 trillion 'face' or nominal value, 30 times the size of the U.S.
10 pages (2500 words) Essay
Stock Market Master Essay
Stock market is governed by stock exchange which is a corporation that provides facilities to the traders and brokers to trade company stock and (or) other securities. It also regulates the issue and redemption of securities as well as other financial instruments and capital events like dividend and payment of income.
10 pages (2500 words) Essay
First and foremost in the consideration is that no countries have the same currency denominations. For example, an American firm operating in Japan will expect that its sales income is in terms of yen for that certain country. Companies from
6 pages (1500 words) Essay
Stock Market
If a person uses such information to buy or sell a company’s shares in the stock market this could amount to insider trading and which is a highly prosecutable criminal offence in the UK. (, 2007) For fair treatment of
5 pages (1250 words) Essay
The European sovereign debt crisis dominated international financial markets during 2010-2012. Economies fell into recession and financial market volatility was high
he Greece deficit was the first explicit sign that the Euro-zone was facing and had been facing severe problems in their financial structure and regulations, and these problems would go on to affect all the nations in the European nations. The European Sovereign debt crisis
8 pages (2000 words) Essay
How do stock price volatility affect monetary policy
Stock markets are the non-physical facilities in a country basically used for economic transactions. They directly determine the economic strengths of the country as well as its development. The changes in the stock prices have a significant impact on the
11 pages (2750 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Contact Us