Volume 1, Number 3 / September , Pages 169-254
Jump Diffusion Processes and Emerging Bond and Stock Markets: An Investigation Using Daily Data
Multinational Finance Journal, 1997, vol. 1, no. 3, pp. 169-197
Mandeep S. Chahal , Enron Capital and Trade Resources, U.S.A    Corresponding Author
Jun Wang , SAS Institute Inc., U.S.A

The underlying stochastic processes that drive returns in several emerging bond and stock markets are investigated using the pure diffusion, the jump diffusion, the ARCH pure diffusion, and the ARCH jump diffusion models. The results indicate that jump diffusion models fit the data better than pure diffusion models. Possible sources and linkages of information surprises in emerging stock and bond markets are also investigated. Bond and stock returns of the same country exhibit simultaneous jumps, indicating a possible linkage of the two markets. U.S. equity returns respond to jumps in emerging bond markets but not to jumps in emerging stock markets

Keywords : emerging markets; ARCH; jump diffusion; information surprises; distribution characteristics
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