Dynamic Persistence of Shocks to Stock Prices in Emerging Markets: Non-Normal Distributions, Structural Changes and Asymmetry

Abstract

This study examines the persistence of shocks to stock prices in emerging markets, with accounting for non-normal distributions, structural changes and asymmetry by means of the recent developments in the quantile autoregression models. The results, from the data covering the January 1988–January 2025 period for the stock price index of 24 emerging markets, show the importance of simultaneously accounting for these data properties in analysing the effects of shocks to stock prices. We find that the shocks tend to be temporary, demonstrating a mean-reversion in stock prices of emerging markets, which provides implications for trading strategies, portfolio investment and risk management.