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Volatility Spillovers between the US and China Stock Markets: Structural Break Test with Symmetric and Asymmetric GARCH Approaches

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  • Gyu-Hyen Moon
  • Wei-Choun Yu

Abstract

The paper examines the short-run spillover effects of daily stock returns and volatilities between the Standard & Poor's (S&P) 500 stock index in the US and the Shanghai Stock Exchange (SSE) index in China. First, we find that a structural break occurred in the SSE stock return mean in December 2005. Second, by analyzing modified general autoregressive conditional heteroscedasticity (GARCH)(1,1)-M models, we find evidence of a symmetric and asymmetric volatility spillover effect from the US to the China stock market in the post-break period. Third, we observe the symmetric volatility spillover effect from China to the US in the post-break period.

Suggested Citation

  • Gyu-Hyen Moon & Wei-Choun Yu, 2010. "Volatility Spillovers between the US and China Stock Markets: Structural Break Test with Symmetric and Asymmetric GARCH Approaches," Global Economic Review, Taylor & Francis Journals, vol. 39(2), pages 129-149.
    • Handle: RePEc:taf:glecrv:v:39:y:2010:i:2:p:129-149
    DOI: 10.1080/1226508X.2010.483834
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