A multiscale analysis of stock return co-movements and spillovers: Evidence from Pacific developed markets

In this paper we examine the stock market co-movement and volatility spillover dynamics in the Pacific developed markets for a period spanning over January 05, 2001 to January 09, 2018. We employ wavelet-based techniques to study the multiscale co-movement dynamics of stock returns. Additionally, we also study the subtleties of volatility spillover of returns among the sample countries. We find that: (a) diversification benefits in these markets are limited due to higher degrees of integration, (b) Pacific developed markets co-move strongly during the periods of financial crisis (i.e. the contagion hypothesis) and (c) higher degree of volatility spills during financial crisis. We believe our study holds significance in the perspective of international portfolio diversification.