Global Financial Crisis and Stock Markets Volatility: A Comparison of Diverse Financial Structure Countries

Abstract

The stock markets play a crucial and dominant role in economic progression of countries. These are also considered as barometers of the economy. The external shocks can considerably effect the functioning of stock markets. The similar situation occurred inepisodes of global financial crisis which shaked the confidence of investors and enhanced volatility of stock markets across the globe. The study is intended to examine and compare the volatility pattern of stock markets across countries of different financial structure. The stock markets of top fifty countries are selected for this purpose and their daily prices are collected. The analysis of data is made by applying EGARCH methodology and effect of crisis is examined by adding a dummy variable in variance equation. The results indicate that volatility of stock markets significantly enhanced in majority of sample countries during crisis period. The differential effect across diverse financial structure countries is, however, not found.