A study of stock market linkages between the US and frontier countries

My dissertation investigates the financial linkages and transmission of economic shocks between the US and the smallest emerging markets (frontier markets). The first chapter sets up an empirical model that examines the impact of US market returns and conditional volatility on the returns and conditional volatilities of twenty-one frontier markets. The model is estimated via maximum likelihood; utilizes the GARCH model of errors, and is applied to daily country data from the MSCI Barra. We find limited, but statistically significant exposure of Frontier markets to shocks from the US. Our results suggest that it is not the lagged US market returns that have impact; rather it is the expected US market returns that influence frontier market returns The second chapter sets up an empirical time-varying parameter (TVP) model to explore the time-variation in the impact of mean US returns on mean Frontier market returns. The model utilizes the Kalman filter algorithm as well as the GARCH model of errors and is applied to daily country data from the MSCI Barra. The TVP model detects statistically significant time-variation in the impact of US returns and low, but statistically and quantitatively important impact of US market conditional volatility. The third chapter studies the risk-return relationship in twenty Frontier country stock markets by setting up an international version of the intertemporal capital asset pricing model. The systematic risk in this model comes from covariance of Frontier market stock index returns with world returns. Both the systematic risk and risk premium are time-varying in our model. We also incorporate own country variances as additional determinants of Frontier country returns. Our results suggest statistically significant impact of both world and own country risk in explaining Frontier country returns. Time-variation in the world risk premium is also found to be statistically significant for most Frontier market returns. However, own country risk is found to be quantitatively more important.

Does variation in movement tactics and trophic interactions among American alligators create habitat linkages?

1. Highly mobile top predators are hypothesized to spatially and/or temporally link disparate habitats through the combination of their movement and feeding patterns, but recent studies suggest that individual specialization in habitat use and feeding could keep habitats compartmentalized. 2.  We used passive acoustic telemetry and stable isotope analysis to investigate whether specialization in movement and feeding patterns of American alligators (Alligator mississippiensis) in an oligotrophic subtropical estuary created habitat linkages between marine and estuarine/freshwater food webs. 3.  Individual alligators adopted one of the three relatively distinct movement tactics that were linked to variation in diets. Fifty-six per cent of alligators regularly travelled from the upstream (freshwater/mid-estuary) areas into the downstream (marine-influenced) areas where salinities exceed those typically tolerated by alligators. Thirty-one per cent of the alligators made regular trips from the mid-estuarine habitat into the upstream habitat; 13% remained in the mid-estuary zone year-round. 4.  Stable isotopic analysis indicated that, unlike individuals remaining in the mid-estuary and upstream zones, alligators that used the downstream zone fed at least partially from marine food webs and likely moved to access higher prey abundance at the expense of salt stress. Therefore, ‘commuting’ alligators may link marine food webs with those of the estuary and marshes in the coastal Everglades and create an upstream vector for allochthonous nutrient inputs into the estuary. 5.  This study lends further support to the hypothesis that large-bodied highly mobile predators faced with trade-offs are likely to exhibit individual specialization leading to habitat linkages, rather than compartmentalization. However, the conditions under which this scenario occurs require further investigation.