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Volatility spillover between the US, Chinese and Australian stock markets

Author

Listed:
  • Emawtee Bissoondoyal-Bheenick

    (Department of Banking and Finance, Monash Business School, Caulfield East, VIC, Australia)

  • Robert Brooks

    (Department of Econometrics and Business Statistics, Monash Business School, Caulfield East, VIC, Australia)

  • Wei Chi

    (Department of Banking and Finance, Monash Business School, Caulfield East, VIC, Australia)

  • Hung Xuan Do

    (Finance Discipline Group, University of Technology Sydney, Ultimo, NSW, Australia; School of Economics Finance, Massey University, Albany Campus, Auckland, New Zealand)

Abstract

We assess the stock market volatility spillover between three closely related countries, the United States, China and Australia. This study considers industry data and hence provides a clear idea of the channels through which volatility is transmitted across these countries. We find that there is significant bilateral causality between the countries at the market index level and across most of the industries for the full sample period from July 2007 to May 2016. There is one-way volatility spillover from the United States to China in the financial services, industrials, consumer discretionary and utilities industry. There is insignificant volatility spillover from the Australian to Chinese stock markets in financial services, telecommunications and energy industries. Once we remove the effect of the global financial crisis (GFC), we find significant bilateral relationship across all of the industries across the three countries. JEL Classification: G15

Suggested Citation

  • Emawtee Bissoondoyal-Bheenick & Robert Brooks & Wei Chi & Hung Xuan Do, 2018. "Volatility spillover between the US, Chinese and Australian stock markets," Australian Journal of Management, Australian School of Business, vol. 43(2), pages 263-285, May.
    • Handle: RePEc:sae:ausman:v:43:y:2018:i:2:p:263-285
    DOI: 10.1177/0312896217717305
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    3. He, Mengxi & Wang, Yudong & Zeng, Qing & Zhang, Yaojie, 2023. "Forecasting aggregate stock market volatility with industry volatilities: The role of spillover index," Research in International Business and Finance, Elsevier, vol. 65(C).
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    5. Huang, Junbo & Tian, Huiting & Shen, Weibing, 2023. "Characteristics and mechanisms of the U.S. stock market spillover effects on the Chinese A-share market: Evidence from 6 A-share broad-based and 31 sector indices," International Review of Financial Analysis, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    Bi-power variation; granger casuality test; realized volatility; volatility spillover;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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