Abstract
M.Com. (Finance)
The aim of this dissertation was to determine what the significance of new information and shocks are on different commodity-based equity markets (de- veloped versus emerging). That is, if shocks occur, how will the different markets react; how big will the differences be between these markets; and how long will it take the different markets to absorb the shocks? Therefore, if a shock is introduced as new information, how does the market react? The mar- kets will eventually reach a new equilibrium, but how long will it take to reach the new equilibrium in the different markets? This was be done by making use of a vector error correction model (VECM). The effect of new information on volatility was also tested in a generalized autoregressive conditional heteroskedasticity (GARCH) framework, by making use of a similar approach to Chen, Firth and Rui (2001). GARCH models which include trading volume as an explanatory variable which was regarded as a proxy for information flow, were used to forecast volatility. This would indicate whether trading volume changes (flow of information) are significant when forecasting volatility.