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Spillover Effects of Chinese Stock Markets

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Author Info

  • Ginny ju-ann Yang

    ()
    (Department of Money and Banking, National Kaohsiung First University of Science and Technology)

  • Koyin Chang

    ()
    (Department of Healthcare Information and Management, Ming Chuan University)

  • Yung-Hsiang Ying

    ()
    (Undergraduate Program of Business Administration, National Taiwan Normal University)

  • Chen-hsun Lee

    ()
    (Department of Money and Banking, National Kaohsiung First University of Science and Technology)

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    Abstract

    This study utilized the cross-sectional independence test established by Pesaran (2004) to identify the existence of common factors in stock markets functioning in Chinese regions. The volatility spillover test of Hafner and Herwartz (2006) based on the Lagrange multiplier (LM) principle was also adapted to test for non-causality in the variance of stock indexes of Chinese stock markets. Our results show that cross-sectional interdependence is apparent in Chinese stock markets; however, only stock markets with higher market values, such as those in Shanghai and Hong Kong, have influence on the Taiwan stock market.

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    File URL: http://www.accessecon.com/Pubs/EB/2014/Volume34/EB-14-V34-I1-P21.pdf
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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 34 (2014)
    Issue (Month): 1 ()
    Pages: 200-205

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    Handle: RePEc:ebl:ecbull:eb-13-00476

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    Related research

    Keywords: cross-sectional independence test; Lagrange multiplier; non-causality in the variance;

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    References

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    1. King, Mervyn A & Wadhwani, Sushil, 1990. "Transmission of Volatility between Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 5-33.
    2. Engle, Robert F & Ito, Takatoshi & Lin, Wen-Ling, 1990. "Meteor Showers or Heat Waves? Heteroskedastic Intra-daily Volatility in the Foreign Exchange Market," Econometrica, Econometric Society, vol. 58(3), pages 525-42, May.
    3. Lundbergh, Stefan & Terasvirta, Timo, 2002. "Evaluating GARCH models," Journal of Econometrics, Elsevier, vol. 110(2), pages 417-435, October.
    4. Angelos Kanas, 2002. "Mean and Variance Causality between Official and Parallel Currency Markets: Evidence from Four Latin American Countries," The Financial Review, Eastern Finance Association, vol. 37(2), pages 137-163, 05.
    5. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    6. Hafner, Christian M. & Herwartz, Helmut, 2006. "Volatility impulse responses for multivariate GARCH models: An exchange rate illustration," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 719-740, August.
    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.
    8. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
    9. Hong, Yongmiao, 2001. "A test for volatility spillover with application to exchange rates," Journal of Econometrics, Elsevier, vol. 103(1-2), pages 183-224, July.
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