TY - JOUR
T1 - A Bayesian analysis of market information linkages among NAFTA countries using a multivariate stochastic volatility model
AU - Fleischer, Petra
AU - Maller, Ross
AU - Müller, Gernot
PY - 2011/4
Y1 - 2011/4
N2 - 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.
AB - 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.
KW - Equity Market Returns
KW - Information and Volatility Linkages
KW - Markov Chain Monte Carlo
KW - North American Free Trade Agreement (NAFTA)
KW - Volatility Correlations
UR - http://www.scopus.com/inward/record.url?scp=79953164264&partnerID=8YFLogxK
U2 - 10.1007/s12197-009-9086-2
DO - 10.1007/s12197-009-9086-2
M3 - Article
SN - 1055-0925
VL - 35
SP - 123
EP - 148
JO - Journal of Economics and Finance
JF - Journal of Economics and Finance
IS - 2
ER -