Title: On international financial spillovers to frontier markets

Authors: Galin Todorov; Prasad Bidarkota

Addresses: Department of Economics, Florida International University, 11200 SW 8th Street, Miami, FL 33199, USA ' Department of Economics, Florida International University, 11200 SW 8th Street, Miami, FL 33199, USA

Abstract: We explore the degree to which stock index returns and conditional volatility of 21 frontier markets were affected by fluctuations on the US stock market between December 1st 2005 and January 15th 2010. We find weak, positive return spillovers from the USA to 17 frontier markets. For four countries, Jordan, Lebanon, Nigeria, and Kenya, we find weak negative return spillovers from the USA, implying possible diversification opportunities. For 13 markets, the influence of past local shocks is greater than the influence of current shocks from the USA, and for 16 markets, local past volatility has stronger impact than volatility from the USA.

Keywords: frontier markets; emerging markets; financial spillovers; contagion; time-varying volatility; stock index returns; US stock market; USA; United States; Jordan; Lebanon; Nigeria; Kenya; diversification opportunities; financial shocks.

DOI: 10.1504/IJEBR.2013.054257

International Journal of Economics and Business Research, 2013 Vol.5 No.4, pp.433 - 452

Published online: 30 Dec 2013 *

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