IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-08c30065.html
   My bibliography  Save this article

Multivariate GARCH modeling analysis of unexpected U.S. D, Yen and Euro-dollar to Reminibi volatility spillover to stock markets

Author

Listed:
  • Ching-Chun Wei

    (Department of Fiance, Providence Univesity)

Abstract

The objective of this paper, by employing the Constant Conditional Correlation(CCC) and Dynamic Conditional Correlation(DCC) MGARCH-M model using the unexpected exchange rate shock to measure the impact effect of the U.S.D, Yen and Eurodollar exchange rate shock mean and volatility spillover to stock markets. The empirical results of the CCC-MGARCH shows the negative correlation between the unexpected U.S.D-RMB at China stock markets indicate that unexpected shock will have a negative effect to the China stock markets. The positive correlation of New York Dow Jones and two China stock markets show that the increase of New York stock market index will increase the China stock market index. From the DCC-MGARCH(1,1) model, the positive and significant value of £\ and £] show ARCH and GARCH effect exist. The DCC parameters are insignificantly and the sum value of the parameters is less than one, show that model is mean reverting.

Suggested Citation

  • Ching-Chun Wei, 2008. "Multivariate GARCH modeling analysis of unexpected U.S. D, Yen and Euro-dollar to Reminibi volatility spillover to stock markets," Economics Bulletin, AccessEcon, vol. 3(64), pages 1-15.
    • Handle: RePEc:ebl:ecbull:eb-08c30065
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/pubs/EB/2008/Volume3/EB-08C30065A.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gao, Ting, 2000. "Exchange rate movements and the profitability of U.S. multinationals," Journal of International Money and Finance, Elsevier, vol. 19(1), pages 117-134, February.
    2. Richard A. Ajayi & Mbodja Mougouė, 1996. "On The Dynamic Relation Between Stock Prices And Exchange Rates," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 19(2), pages 193-207, June.
    3. Baharumshah, Ahmad Zubaidi & M. Masih, A. Mansur & Azali, M., 2002. "The stock market and the ringgit exchange rate: a note," Japan and the World Economy, Elsevier, vol. 14(4), pages 471-486, December.
    4. Angelos Kanas, 2000. "Volatility Spillovers Between Stock Returns and Exchange Rate Changes: International Evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3‐4), pages 447-467, April.
    5. Jeong, Jin-Gil, 1999. "Cross-border transmission of stock price volatility: evidence from the overlapping trading hours," Global Finance Journal, Elsevier, vol. 10(1), pages 53-70.
    6. Kearney, Colm & Patton, Andrew J, 2000. "Multivariate GARCH Modeling of Exchange Rate Volatility Transmission in the European Monetary System," The Financial Review, Eastern Finance Association, vol. 35(1), pages 29-48, February.
    7. Hamao, Yasushi & Masulis, Ronald W & Ng, Victor, 1990. "Correlations in Price Changes and Volatility across International Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 281-307.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chen Jo-Hui & Diaz John Francis T., 2021. "Application of grey relational analysis and artificial neural networks on currency exchange-traded notes (ETNs)," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 25(2), pages 1-17, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:ebl:ecbull:v:3:y:2008:i:64:p:1-15 is not listed on IDEAS
    2. Gagan Deep Sharma & Namish Mishra, 2015. "Return Linkages and Volatility Spillover Effect Between Stock Markets and Currency Markets," Review of Market Integration, India Development Foundation, vol. 7(3), pages 175-197, December.
    3. Manish Kumar, 2011. "Return and volatility spillovers: evidence from Indian exchange rates," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 3(4), pages 371-387.
    4. Gannon, Gerard L. & Thuraisamy, Kannan S., 2017. "Sovereign risk and the impact of crisis: Evidence from Latin AmericaAuthor-Name: Batten, Jonathan A," Journal of Banking & Finance, Elsevier, vol. 77(C), pages 328-350.
    5. Yau, Hwey-Yun & Nieh, Chien-Chung, 2006. "Interrelationships among stock prices of Taiwan and Japan and NTD/Yen exchange rate," Journal of Asian Economics, Elsevier, vol. 17(3), pages 535-552, June.
    6. Alok Kumar Mishra, 2004. "Stock Market and Foreign Exchange Market in India: Are they Related?," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 5(2), pages 209-232, September.
    7. Ewing, Bradley T. & Malik, Farooq, 2005. "Re-examining the asymmetric predictability of conditional variances: The role of sudden changes in variance," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2655-2673, October.
    8. Yusaku Nishimura & Yoshiro Tsutsui & Kenjiro Hirayama, 2016. "The Chinese Stock Market Does not React to the Japanese Market: Using Intraday Data to Analyse Return and Volatility Spillover Effects," The Japanese Economic Review, Springer, vol. 67(3), pages 280-294, September.
    9. N Mozumder & G De Vita & K.S. Kyaw & C Larkin, 2015. "Volatility Spillover Between Stock Prices and Exchange Rates: New Evidence Across the Recent Financial Crisis Period," Economic Issues Journal Articles, Economic Issues, vol. 20(1), pages 43-64, March.
    10. Bubák, Vít & Kocenda, Evzen & Zikes, Filip, 2011. "Volatility transmission in emerging European foreign exchange markets," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2829-2841, November.
    11. Do, A. & Powell, R. & Yong, J. & Singh, A., 2020. "Time-varying asymmetric volatility spillover between global markets and China’s A, B and H-shares using EGARCH and DCC-EGARCH models," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    12. Abdul Hakim & Michael McAleer, 2010. "Modelling the interactions across international stock, bond and foreign exchange markets," Applied Economics, Taylor & Francis Journals, vol. 42(7), pages 825-850.
    13. Jamela Hoveni & Lumengo Bonga-Bonga, 2011. "Volatility Spillovers between the Equity Market and Foreign Exchange Market in South Africa," Working Papers 252, Economic Research Southern Africa.
    14. Sadýk Cukur & Yusuf Volkan Topuz, 2005. "Exchange Rate Exposure: An Empirical Application for Textile Industry on the Istanbul Stock Exchange," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 8(30), pages 19-30.
    15. Weber, Christoph S., 2019. "The effect of central bank transparency on exchange rate volatility," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 165-181.
    16. Oral Erdogan & Harald Schmidbauer, 2006. "Investors’ Selection Between Two Financial Markets: A Conditional Correlation Approach," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 8(30), pages 1-18.
    17. Malik, Farooq & Hammoudeh, Shawkat, 2007. "Shock and volatility transmission in the oil, US and Gulf equity markets," International Review of Economics & Finance, Elsevier, vol. 16(3), pages 357-368.
    18. Rim Ammar Lamouchi & Ruba Khalid Shira, 2023. "Heterogeneous Behavior and Volatility Transmission in the Forex Market using High-Frequency Data," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 13(3), pages 1-3.
    19. Nishimura, Yusaku & Tsutsui, Yoshiro & Hirayama, Kenjiro, 2015. "Intraday return and volatility spillover mechanism from Chinese to Japanese stock market," Journal of the Japanese and International Economies, Elsevier, vol. 35(C), pages 23-42.
    20. Andrew Worthington & Helen Higgs, 2001. "A multivariate GARCH analysis of equity returns and volatility in Asian equity markets," School of Economics and Finance Discussion Papers and Working Papers Series 089, School of Economics and Finance, Queensland University of Technology.
    21. Komain Jiranyakul, 2012. "Linkages between Thai stock and foreign exchange markets under the floating regime," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(4), pages 305-319, December.

    More about this item

    Keywords

    CCC and DCC-MGARCH Spillover over effect exchange rate shock;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • F3 - International Economics - - International Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-08c30065. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.