STOCK-MARKET VOLATILITY AND THE CRASH OF 1987 - EVIDENCE FROM 6 EMERGING MARKETS

This paper studies volatility, risk premia and the persistence of vola tility in six emerging stock markets before and after the 1987 stock m arket crash. The empirical investigation is conducted by means of the GARCH in the mean model (GARCH-M) and monthly data from Argentina, Gre ece, India, Mexico, Thailand, and Zimbabwe between January of 1976 and August of 1994. Results indicate changes in the ARCH parameter, risk premia and persistence of volatility before and after the 1987 crash. But these noted changes are not uniform and depend upon the individual markets. Factors other than the 1987 crash may also be responsible fo r the changes. (JEL G15). Copyright (C) 1996 Elsevier Science Ltd.