A MULTIVARIATE GARCH MODEL OF INTERNATIONAL TRANSMISSIONS OF STOCK RETURNS AND VOLATILITY - THE CASE OF THE UNITED-STATES AND CANADA

This study examines the short-run dynamics of returns and volatility f or stocks traded on the New York and Toronto stock exchanges. The main finding is that inferences about the magnitude and persistence of ret urn innovations that originate in either market and that transmit to t he other market depend importantly on how the cross-market dynamics in volatility are modeled. Moreover, much weaker cross-market dynamics i n returns and volatility prevail during later subperiods and especiall y for Canadian stocks with shares dually listed in New York. Implicati ons for international asset pricing, hedging strategies, and regulator y policy are discussed.