Knif Johan and Seppo Pynnonen (1998). Common Short-Term Volatility on International Stock Markets. Working Papers 386, Swedish School of Economics and Business Administration.

This paper analyzes volatility structures and the presence of common volatility components in the stock markets of Asian-Pacific, Europe and North America using close-to-close daily returns in measured local currencies. Before volatility modeling the return series are filtered in order to remove first order autocorrelations. Furthermore, the consequences of nonsynchroneity in the opening hours of the markets are carefully taken into account. As expected the results indicate that an ARCH effect is present in all of the markets. However, only a few pairs of markets seem to share a common volatility structure. In these pairs US is often one of the markets. Of the European markets, only France and the small Nordic markets seem to share a common volatility with the US. It seems like the small markets follow the volatility generated in the US. Furthermore, a common time-varying volatility seems to be present in the stock markets of Canada and the US. In addition, Hong Kong also seems to share a common volatility with the US.