INTRADAY VOLATILITY IN INTERNATIONAL STOCK INDEX FUTURES MARKETS - METEOR-SHOWERS OR HEAT WAVES

The international transmission of intraday price volatility among the United States, United Kingdom, and Japanese stock index futures market s in the period 1988-1994 is investigated in this paper. The empirical results based on extreme-value estimators and vector autoregression i ndicate the rapid transmission of information between markets. The vol atilities of the U.S. and U.K. futures markets appear to follow a mete or shower rather than a heat wave type of process. This means that the se volatilities react to shocks from other markets, i.e., they cannot be described only by their past values. However, the heat wave hypothe sis is not rejected for the Japanese market, meaning that the shocks t o Japanese volatility are mostly country-specific. A multivariate GARC H model supports the U.K. and Japanese but not the U.S. results.