Homogeneous Beliefs, Trading Volume and Co-Movements of Stock Market Returns : A Study of Russian and the US Markets

This paper develops an empirical model that tests the effect of information arrival in one market on the return and volatility of stocks in another market. Tests using this empirical model on the effect of the U.S., London, and German market information arrivals on Russian stocks indicate that the returns of Russian stocks are affected by both positive and negative information arrivals in the all three markets and the Russian domestic market. On the other hand the volatilities of Russian stocks are affected predominantly by the shocks in the U.S. and Russian domestic markets