Abstract

This paper will examine the volatility of markets returns, dynamic conditional covariance and dynamic
conditional correlation between the equity markets of developed countries (US and UK) and the equity markets
of developing countries (Kuwait and United Arab Emirates). A multivariate generalized autoregressive
conditional heteroskedasticity (MGARCH) model will be used; Diagonal VEC (DVEC) - MGARCH VEC model originally by, Bollerslev, Engle, and Wooldridge (1988)> to identify the source and magnitude of
volatility. The results will show the relation between the global mature market of USA and the UK on the
emerging markets of Kuwait (K) and UAE.

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