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Return and Volatility Spillovers between Japanese and Chinese Stock MarketsFAn Analysis of Overlapping Trading Hours with High-frequency Data

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Author Info

  • Yusaku Nishimura

    ()
    (Institute of International Economy, University of International Business and Economics)

  • Yoshiro Tsutsui

    ()
    (Graduate School of Economics, Osaka University)

  • Kenjiro Hirayama

    ()
    (Kwansei Gakuin University)

Abstract

In this paper we analyze return and volatility spillovers during overlapping trading hours between China (Shanghai Composite Index) and Japan (Nikkei 225 Index) using intraday high-frequency data. We first adjusted the 5-min. returns for intraday periodicity with Flexible Fourier Form (FFF). Then these data are used to estimate a FIAPARCH model the standard residuals of which are then employed to test for causality in mean and in variance with a cross-correlation function (CCF) approach. The results indicate a unidirectional influence from China to Japan both in terms of return and volatility. Further, volatility spillover arises with some delay after a return spillover.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1201.pdf
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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 12-01.

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Length: 26 pages
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:osk:wpaper:1201

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Web page: http://www.econ.osaka-u.ac.jp/
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Related research

Keywords: Yield spreads; intraday return and volatility spillover effects; high-frequency data; intraday periodicity; CCF approach; Flexible Fourier Form;

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References

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  1. Yoshiro Tsutsui & Kenjiro Hirayama & Takahiro Tanaka & Nobutaka Uesugi, 2007. "Special Quotes Invoke Autocorrelation in Japanese Stock Prices ," Asian Economic Journal, East Asian Economic Association, vol. 21(4), pages 369-386, December.
  2. Cheung, Yin-Wong & Ng, Lilian K., 1996. "A causality-in-variance test and its application to financial market prices," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 33-48.
  3. Kenjiro Hirayama & Yoshiro Tsutsui, 2009. "Are Chinese Stock Investors Watching Tokyo? An Analysis of Intraday High-Frequency Data from Two Chinese Stock Markets and the Tokyo Stock," Discussion Papers in Economics and Business 09-35, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  4. Laurent, Sebastien & Peters, Jean-Philippe, 2002. " G@RCH 2.2: An Ox Package for Estimating and Forecasting Various ARCH Models," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 447-85, July.
  5. Yusaku Nishimura & Ming Men, 2010. "The paradox of China's international stock market co-movement: Evidence from volatility spillover effects between China and G5 stock markets," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 3(3), pages 235-253, December.
  6. Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
  7. Mukherjee, Kedar nath & Mishra, Ram Kumar, 2010. "Stock market integration and volatility spillover: India and its major Asian counterparts," Research in International Business and Finance, Elsevier, vol. 24(2), pages 235-251, June.
  8. Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996. "Fractionally integrated generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 74(1), pages 3-30, September.
  9. 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.
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Cited by:
  1. Yusaku Nishimura & Yoshiro Tsutsui & Kenjiro Hirayama, 2014. "Intraday Return and Volatility Spillover Mechanism from Chinese to Japanese Stock Market," Discussion Papers in Economics and Business 14-01, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).

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