Information Transmission in Post-recession Era: Evidence from India, China, Hong Kong and Japan

The study proposes to investigate lead lag relationship in price discovery, volatility spilloverVolatility spillover and leverage effectLeverage effect in stock exchanges of four Asian economies namely IndiaIndia , China, Hong Kong and Japan. Data comprises of daily closing values of the indices Hang Seng Composite for Hong Kong, Nikkei for Japan, Shanghai Composite Index for China and Sensex for IndiaIndia . Johansson Co-integrationCo-Integration Test, VEC modelVEC Model , Granger CausalityGranger causality Test, ARCH LM test and EGARCH modelEGARCH model have been employed to examine and explore price discovery, volatilityVolatility behavior and leverage effectLeverage effect from one country to another. In post crisis period IndiaIndia is co-integrated with China but is not integrated with Hong Kong and Japan. China is co-integrated with Hong Kong but not with Japan. Hong Kong and Japan are co integrated with each other. IndiaIndia leads China in price discovery process. Hong Kong leads China and Japan in price discovery process. VolatilityVolatility spillovers have been found among these Asian countries in post-recession era. Leverage effectLeverage effect is observed among all market pairs except for Hong Kong and China. The study further shows that good news information transmission generates less volatilityVolatility for stock markets of IndiaIndia , Hong Kong and Japan but on the contrary it generates more volatilityVolatility for stock markets of China. The research contributes to existing literature on lead lag relationship in price discovery, volatilityVolatility spillovers, leverage effectLeverage effect in stock markets, and is one of the very few studies conducted for select Asian countries.