Dr. Matthew D. Brigida, associate professor of finance at Clarion University, published an article, "A GARCH Analysis of Volatility in Country Indices," in the International Journal of Global Management Studies Professional, Vol. 1:3 (December 2010).

In this paper Brigida estimates the coefficients of the Heston-Nandi GARCH(1,1) model of the distribution of log-returns, for each country with an MSCI index as of 1996. These parameters are compared across developing and developed nations. He also tests whether these parameters are affected by the level of governance in each country.

He finds that total risk, adjusted for kurtosis, is a significant predictor of whether the country is developed or developing, and that relative total volatility, between developed and developing nations, varies over time. Further, there is no constant relationship between governance indicators and the skewness or kurtosis of log-returns in the country indices.

These results imply that financial analyses which rely on the distribution of returns, particularly derivative pricing and value-at-risk, may be implemented in the same fashion across developed and developing markets, so long as the analyses account for differing first and second moments.

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