A Bayesian analysis of market information linkages among NAFTA countries using a multivariate stochastic volatility model

Petra Fleischer, Ross Maller, Gernot Müller*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    3 Citations (Scopus)

    Abstract

    NAFTA has arguably been the most important and elaborate free-trade agreement in history, providing a blueprint for potential new agreements. So far, the evidence is mixed as to whether NAFTA has been successful in terms of its economic impact. We fit a multivariate stochastic volatility model that directly measures financial information linkages across the three participating countries in a trivariate setting. The model detects significant changes in information linkages across the countries from the pre- to post-NAFTA period with a high degree of reliability. This has implications not only for measuring these linkages but also for hedging and portfolio diversification policies. An MCMC procedure is used to fit the model, and the accuracy and robustness of the method is confirmed by simulations.

    Original languageEnglish
    Pages (from-to)123-148
    Number of pages26
    JournalJournal of Economics and Finance
    Volume35
    Issue number2
    DOIs
    Publication statusPublished - Apr 2011

    Fingerprint

    Dive into the research topics of 'A Bayesian analysis of market information linkages among NAFTA countries using a multivariate stochastic volatility model'. Together they form a unique fingerprint.

    Cite this