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Transmission of equity returns and volatility in Asian developed and emerging markets: a multivariate GARCH analysis

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  • Andrew Worthington

    (School of Economics and Finance, Queensland University of Technology, QLD 4001, Australia)

  • Helen Higgs

    (School of Economics and Finance, Queensland University of Technology, QLD 4001, Australia)

Abstract

This paper examines the transmission of equity returns and volatility among Asian equity markets and investigates the differences that exist in this regard between the developed and emerging markets. Three developed markets (Hong Kong, Japan and Singapore) and six emerging markets (Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand) are included in the analysis. A multivariate generalized autoregressive conditional heteroskedasticity (MGARCH) model is used to identify the source and magnitude of spillovers. The results generally indicate the presence of large and predominantly positive mean and volatility spillovers. Nevertheless, mean spillovers from the developed to the emerging markets are not homogeneous across the emerging markets, and own-volatility spillovers are generally higher than cross-volatility spillovers for all markets, but especially for the emerging markets. Copyright © 2003 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 9 (2004)
Issue (Month): 1 ()
Pages: 71-80

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Handle: RePEc:ijf:ijfiec:v:9:y:2004:i:1:p:71-80

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  1. Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," NBER Working Papers 6312, National Bureau of Economic Research, Inc.
  2. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
  3. Ky-Hyang Yuhn, 1997. "Financial Integration and Market Efficiency: Some International Evidence from Cointegration Tests," International Economic Journal, Taylor & Francis Journals, vol. 11(2), pages 103-116.
  4. Bollerslev, Tim, 1990. "Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 498-505, August.
  5. Taimur Baig & Ilan Goldfajn, 1999. "Financial Market Contagion in the Asian Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 46(2), pages 3.
  6. Boorman, Jack & Lane, Timothy & Schulze-Ghattas, Marianne & Bulir, Ales & Ghosh, Atish R. & Hamann, Javier & Mourmouras, Alex & Phillips, Steven, 2000. "Managing financial crises: the experience in East Asia," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 53(1), pages 1-67, December.
  7. Dunne, Peter G., 1999. "Size and book-to-market factors in a multivariate GARCH-in-mean asset pricing application," International Review of Financial Analysis, Elsevier, vol. 8(1), pages 35-52.
  8. Eduardo Roca, 1999. "Short-term and long-term price linkages between the equity markets of Australia and its major trading partners," Applied Financial Economics, Taylor & Francis Journals, vol. 9(5), pages 501-511.
  9. Timothy D. Lane & A. Javier Hamann & Marianne Schulze-Gattas & Ales Bulir & Steven Phillips & Atish R. Ghosh & Alex Mourmouras & Jack Boorman, 2000. "Managing Financial Crises," IMF Working Papers 00/107, International Monetary Fund.
  10. Nicholas Tay & Zhen Zhu, 2000. "Correlations in Returns and Volatilities in Pacific-Rim Stock Markets," Open Economies Review, Springer, vol. 11(1), pages 27-47, January.
  11. repec:cup:etheor:v:11:y:1995:i:1:p:122-50 is not listed on IDEAS
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