Volatility Spillover Effects in Interregional Equity Markets: Empirical Evidence from Brazil and Turkey

Abstract

We investigate volatility spillovers between two stock markets: Turkey and Brazil. Using a misspecification-robust causality-in-variance test, we find evidence supporting volatility spillovers from the Sao Paulo Stock Exchange to the Istanbul Stock Exchange. Moreover, the results imply that financial crises may change the nature of volatility spillovers between the two markets by adding an additional channel of volatility transmission from Turkey to Brazil.