The benefits of investing internationally depend on three conditions, namely
cross-country correlations, market volatilities, and future changes in currency
risks (see Odier and Solnik (1993)). This paper investigates these conditions for
several countries. Many papers have modelled both domestic interactions across
asset markets and international interactions in individual asset markets in
isolation, but rarely have they examined international interactions across asset
markets. The paper fills this gap by modelling the international interactions
across stock, bond and foreign exchange markets. Two models that meet these
purposes are the VARMA-AGARCH model of McAleer et al. (2009) and the
VARMA-GARCH model of Ling and McAleer (2003). The countries that will be
modelled in this paper are Australia, Japan, Singapore, New Zealand and USA.
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