Measuring the Common Component of Stock Market Fluctuations in the Asia-Pacific Region
AbstractThis paper fits Generalized Auto-Regressive Conditional Heteroskedasticity (GARCH) models to the daily closing stock market indices of Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, and Taiwan to compute for time-varying weights associated with the volatilities of individual indices. These weights and the returns of the various indices were then used to determine the common component of stock market returns. Our results suggest that a common component of the Asia-Pacific stock market returns exists, which significantly explains the individual country’s stock market returns. We also find that stock markets of Korea and Hong Kong are the two most sensitive to changes in the common component stock returns, while China’s stock market is the least sensitive.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21247.
Date of creation: 2006
Date of revision:
Publication status: Published in The Philippine Statistician 1-4.55(2006): pp. 103-117
Common Component; Volatility; GARCH model;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
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