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Is Small Beautiful? Size Effects of Volatility Spillovers for Firm Performance and Exchange Rates in Tourism

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  • Chia-Lin Chang

    (National Chung Hsing University, Taiwan)

  • Hui-Kuang Hsu

    (National Pingtung Institute of Commerce, Taiwan)

  • Michael McAleer

    (Erasmus University Rotterdam, Kyoto University, Japan, and Complutense University of Madrid, Spain)

Abstract

This paper examines the size effects of volatility spillovers for firm performance and exchange rates with asymmetry in the Taiwan tourism industry. The analysis is based on two conditional multivariate models, BEKK-AGARCH and VARMA-AGARCH, in the volatility specification. Daily data from 1 July 2008 to 29 June 2012 for 999 firms are used, which covers the Global Financial Crisis. The empirical findings indicate that there are size effects on volatility spillovers from the exchange rate to firm performance. Specifically, the risk for firm size has different effects from the three leading tourism sources to Taiwan, namely USA, Japan, and China. Furthermore, all the return series reveal quite high volatility spillovers (at over sixty percent) with a one-period lag. The empirical results show a negative correlation between exchange rate returns and stock returns. However, the asymmetric effect of the shock is ambiguous, owing to conflicts in the significance and signs of the asymmetry effect in the two estimated multivariate GARCH models. The empirical findings provide financial managers with a better understanding of how firm size is related to financial performance, risk and portfolio management strategies that can be used in practice.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 13-008/III.

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Date of creation: 07 Jan 2013
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Handle: RePEc:dgr:uvatin:20130008

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Web page: http://www.tinbergen.nl

Related research

Keywords: Tourism; Size effects; Small-firm effects; Financial performance; Spillover effects; MGARCH; VARMA; BEKK;

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Cited by:
  1. Chia-Lin Chang & Hui-Kuang Hsu & Michael McAleer, 2013. "The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry," Documentos de Trabajo del ICAE, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico 2013-30, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico, revised Aug 2013.
  2. repec:dgr:uvatin:2013021 is not listed on IDEAS
  3. Chia-Lin Chang & David Allen & Michael McAleer, 2013. "Recent Developments in Financial Economics and Econometrics: An Overview," Documentos de Trabajo del ICAE, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico 2013-03, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.

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