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Multivariate GARCH modeling analysis of unexpected U.S. D, Yen and Euro-dollar to Reminibi volatility spillover to stock markets

Author

Listed:
  • Ching-Chun Wei

    () (Department of Fiance, Providence Univesity)

Abstract

The objective of this paper, by employing the Constant Conditional Correlation(CCC) and Dynamic Conditional Correlation(DCC) MGARCH-M model using the unexpected exchange rate shock to measure the impact effect of the U.S.D, Yen and Eurodollar exchange rate shock mean and volatility spillover to stock markets. The empirical results of the CCC-MGARCH shows the negative correlation between the unexpected U.S.D-RMB at China stock markets indicate that unexpected shock will have a negative effect to the China stock markets. The positive correlation of New York Dow Jones and two China stock markets show that the increase of New York stock market index will increase the China stock market index. From the DCC-MGARCH(1,1) model, the positive and significant value of £\ and £] show ARCH and GARCH effect exist. The DCC parameters are insignificantly and the sum value of the parameters is less than one, show that model is mean reverting.

Suggested Citation

  • Ching-Chun Wei, 2008. "Multivariate GARCH modeling analysis of unexpected U.S. D, Yen and Euro-dollar to Reminibi volatility spillover to stock markets," Economics Bulletin, AccessEcon, vol. 3(64), pages 1-15.
  • Handle: RePEc:ebl:ecbull:eb-08c30065
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    References listed on IDEAS

    as
    1. Gao, Ting, 2000. "Exchange rate movements and the profitability of U.S. multinationals," Journal of International Money and Finance, Elsevier, vol. 19(1), pages 117-134, February.
    2. Baharumshah, Ahmad Zubaidi & M. Masih, A. Mansur & Azali, M., 2002. "The stock market and the ringgit exchange rate: a note," Japan and the World Economy, Elsevier, vol. 14(4), pages 471-486, December.
    3. Angelos Kanas, 2000. "Volatility Spillovers Between Stock Returns and Exchange Rate Changes: International Evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3&4), pages 447-467.
    4. Kearney, Colm & Patton, Andrew J, 2000. "Multivariate GARCH Modeling of Exchange Rate Volatility Transmission in the European Monetary System," The Financial Review, Eastern Finance Association, vol. 35(1), pages 29-48, February.
    5. 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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    More about this item

    Keywords

    CCC and DCC-MGARCH Spillover over effect exchange rate shock;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • F3 - International Economics - - International Finance

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