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2004 Documento de Trabajo #189

Time-Scale Decomposition of Price Transmission in International Markets

This article focuses on return spillovers in stock markets at different time scales using wavelet analysis. We look at eight stock indices that comprise the G7 countries, Emerging Asia, Europe, Eastern Europe and the Middle East, the Emerging Far East, Latin America, North America, and the Pacific region for the period 1990-2002. Our estimation results show evidence of price spillovers from the G7 countries to Europe, Eastern Europe and the Middle East, Emerging Asia, Europe, Latin America, and North America. However, price spillovers of these regions to the G7 countries are weaker at different time scales. Similarly, we find price spillovers from North America to Latin America, Emerging Asia, the Emerging Far East, and the Pacific region, and from both Europe and Latin America to North America. Our results are robust to the existence of asymmetric GARCH-effects and serial correlation in returns.

JEL: C22, G15.

Viviana Fernández

Keywords: A-PGARCH models., spillovers, wavelet analysis