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Asymmetric International Transmission in the Conditional Mean and Volatility to the Japanese Market from the U.S.: EGARCH vs. SV Models

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  • Junji Shimada
  • Yoshihiko Tsukuda
  • Tatsuyoshi Miyakoshi
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    Abstract

    This paper investigates whether the upturns and downturns of the U.S. market exert asymmetric influence on the conditional mean and volatility of the Japanese market using the daily returns on stock price indices. Using both the EGARCH and SV models, which simultaneously allow two kinds of asymmetric international transmissions across the markets, the result reconfirms the symmetric transmission in the conditional mean obtained by Bahng and Shin (2003) and the asymmetric transmission in the conditional volatility obtained by Koutmos and Booth (1995) although each of them analyzed the only one spillover effect separately. Although the EGARCH and SV models lead to similar results about the spillover effects, the SV model is preferred to the EGARCH model in terms of the Lagrange Multiplier test of the EGARCH against the SV models. The shock to volatility in the U.S. market with the SV model is asymmetrically transmitted to the volatility in the Japanese market.

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    File URL: http://hdl.handle.net/10097/55381
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    File URL: http://ir.library.tohoku.ac.jp/re/bitstream/10097/55381/1/terg219.pdf
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    Bibliographic Info

    Paper provided by Graduate School of Economics and Management, Tohoku University in its series TERG Discussion Papers with number 219.

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    Length: 18 pages
    Date of creation: Jun 2007
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    Handle: RePEc:toh:tergaa:219

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