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This paper seeks to investigate the short-run dynamics within four international stock markets (Taiwan, American, Japan, and Hong Kong). Unlike previous research on these markets, the joint distribution of stock returns is estimated as an exponential GARCH process. Our study is carried out using closing stock market prices covering the period from 1 Jan. 1996 to 31 Dec. 2000. The results revealed that these countries have significant time dependencies on first and second moment. In general, the markets of these countries exhibit stronger volatility than mean spillovers. In view of these dependencies, the conditional correlations between these markets are different from their conventional simple counterparts. Since the correlation is the catalyst in portfolio diversification and an essential parameter in the calculation of the cost of capital, we anticipate that international investors and corporate managers will find our results very interesting.
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