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Analysing time difference and volatility linkages between China and the United States during financial crises and stable period using VARX‐DCC‐MEGARCH model

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  • Khurram Shehzad
  • Xiaoxing Liu
  • Aviral Tiwari
  • Muhammad Arif
  • Abdul Rauf

Abstract

The study implies VARX‐DCC‐MEGARCH model to investigate the returns transmission, volatility spillovers, asymmetry effect and the dynamic correlation between China and U.S. stock markets, as well as their local stock markets. We found that daytime returns of U.S. stock markets affect the overnight returns of Chinese stock markets. However, overnight returns transmission from the United States to China (daytime) was insignificant. Returns transmissions from Chinese stock markets to the United States are not significant. Daytime volatility of U.S. stock markets significantly spillovers the overnight volatility of Chinese stock markets and daytime volatility of Chinese stock markets spillovers the overnight volatility of U.S. stock markets. Moreover, during financial crises period, negative daily returns of Chinese stock markets significantly transmit to U.S. stock markets. Additionally, returns and volatility spillovers between local markets of the United States was also significant. During the financial crisis, the volatility spillovers between local stocks market of China was significant on one hand and leverage effect for U.S. and Chinese stock markets were also significant on the other hand.

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  • Khurram Shehzad & Xiaoxing Liu & Aviral Tiwari & Muhammad Arif & Abdul Rauf, 2021. "Analysing time difference and volatility linkages between China and the United States during financial crises and stable period using VARX‐DCC‐MEGARCH model," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 814-833, January.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:1:p:814-833
    DOI: 10.1002/ijfe.1822
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    2. Rubaiyat Ahsan Bhuiyan & Afzol Husain & Changyong Zhang, 2023. "Diversification evidence of bitcoin and gold from wavelet analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-36, December.

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