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Shift-Volatility Transmission in East Asian Equity Markets

  • Marcel Aloy

    ()

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

  • Gilles de Truchis

    ()

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

  • Gilles Dufrénot

    ()

    (Banque de France, CEPII, Aix-Marseille School of Economics, Aix-Marseille University)

  • Benjamin Keddad

    ()

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

This paper attempts to provide evidence of “shift-volatility” transmission in the East Asian equity markets. By shift-volatility, we mean the volatility shifts from a low level to a high level, corresponding respectively to tranquil and crisis periods. We examine the interdependence of equity volatilities between Hong-Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, Thailand and the United States. Our main issue is whether shift-volatility needs to be considered as a regional phenomenon, or from a more global perspective. We find that the timing/spans of high volatility regimes correspond adequately to years historically documented as those of crises (the Asian crisis and the years following the 2008 crisis). Moreover, we suggest different indicators that could be useful to guide the investors in their arbitrage behavior in the different regimes: the duration of each state, the sensitivity of the volatility in a market following a change in the volatility in another market. Finally, we are able to identify which market can be considered as leading markets in terms of volatility.

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File URL: http://www.amse-aixmarseille.fr/sites/default/files/_dt/2012/wp_2014_-_nr_02.pdf
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Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1402.

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Length: 18 pages
Date of creation: Mar 2014
Date of revision: Mar 2014
Handle: RePEc:aim:wpaimx:1402
Contact details of provider: Web page: http://www.amse-aixmarseille.fr/en

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