IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Volatility spillovers from the US to Australia and China across the GFC

Author Info

Listed author(s):
  • David E Allen

    (School of Accounting, Finance and Economics, Edith Cowan University)

  • Michael McAleer

    (Econometric Institute Erasmus School of Economics Erasmus University Rotterdam and Tinbergen Institute The Netherlands and Institute of Economic Research Kyoto University Japan and Department of Quantitative Economics Complutense University of Madrid Spain)

  • Robert J Powell

    (School of Accounting, Finance and Economics, Edith Cowan University)

  • Abhay Kumar Singh

    (School of Accounting, Finance and Economics, Edith Cowan University)

Abstract

This paper features an analysis of volatility spillover effects from the US market, represented by the S&P500 index to the Australian capital market as represented by the Australian S&P200 for a period running from 12th September 2002 to 9th September 2012. This captures the impact of the Global Financial Crisis (GFC). The GARCH analysis features an exploration of whether there are any spillover effects in the mean equations as well as in the variance equations. We adopt a bi-mean equation to model the conditional mean in the Australian markets plus an ARMA model to capture volatility spillovers from the US. We also apply a Markov Switching GARCH model to explore the existence of regime changes during this period and we also explore the non-constancy of correlations between the markets and apply a moving window of 120 days of daily observations to explore time-varying conditional and fitted correlations. There appears to be strong evidence of regime switching behaviour in the Australian market and changes in correlations between the two markets particularly in the period of the GFC. We also apply a tri-variate Cholesky-GARCH model to include potential effects from the Chinese market, as represented by the Hang Seng Index

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.kier.kyoto-u.ac.jp/DP/DP838.pdf
Download Restriction: no

Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 838.

as
in new window

Length: 16pages
Date of creation: Dec 2012
Handle: RePEc:kyo:wpaper:838
Contact details of provider: Postal:
Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501

Phone: +81-75-753-7102
Fax: +81-75-753-7193
Web page: http://www.kier.kyoto-u.ac.jp/eng/index.html
Email:


More information through EDIRC

Keywords: Volatility spillovers; Markov-switching GARCH; Cholesky-GARCH; Time-varying correlations.;

Other versions of this item:

Find related papers by JEL classification:
  • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
  • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
  • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
  • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Ling, Shiqing & McAleer, Michael, 2003. "Asymptotic Theory For A Vector Arma-Garch Model," Econometric Theory, Cambridge University Press, vol. 19(02), pages 280-310, April.
  2. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
  3. Engle, Robert F & Ng, Victor K, 1993. "Time-Varying Volatility and the Dynamic Behavior of the Term Structure," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 336-349, August.
  4. Bing Zhang & Xindan Li, 2008. "The asymmetric behaviour of stock returns and volatilities: evidence from Chinese stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 15(12), pages 959-962.
  5. Zheng Yi & Chen Heng & Wing-Keung Wong, 2009. "China’s Stock Market Integration with a Leading Power and a Close Neighbor," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 2(1), pages 1-37, December.
  6. Yilmaz, Kamil, 2010. "Return and volatility spillovers among the East Asian equity markets," Journal of Asian Economics, Elsevier, vol. 21(3), pages 304-313, June.
  7. Matteo Manera & Michael McAleer & Margherita Grasso, 2006. "Modelling time-varying conditional correlations in the volatility of Tapis oil spot and forward returns," Applied Financial Economics, Taylor & Francis Journals, vol. 16(7), pages 525-533.
  8. 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.
  9. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
  10. 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.
  11. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
  12. McAleer, Michael & Chan, Felix & Marinova, Dora, 2007. "An econometric analysis of asymmetric volatility: Theory and application to patents," Journal of Econometrics, Elsevier, vol. 139(2), pages 259-284, August.
  13. Luiz Renato Lima & Breno Pinheiro Néri, 2006. "Comparing Value-at-Risk Methodologies," Computing in Economics and Finance 2006 1, Society for Computational Economics.
  14. Michael McAleer & Suhejla Hoti & Felix Chan, 2009. "Structure and Asymptotic Theory for Multivariate Asymmetric Conditional Volatility," Econometric Reviews, Taylor & Francis Journals, vol. 28(5), pages 422-440.
  15. McAleer, Michael, 2005. "Automated Inference And Learning In Modeling Financial Volatility," Econometric Theory, Cambridge University Press, vol. 21(01), pages 232-261, February.
  16. Johansson, Anders C. & Ljungwall, Christer, 2009. "Spillover Effects Among the Greater China Stock Markets," World Development, Elsevier, vol. 37(4), pages 839-851, April.
  17. Bollerslev, Tim, 1990. "Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 498-505, August.
  18. McAleer, Michael & Chan, Felix & Hoti, Suhejla & Lieberman, Offer, 2008. "Generalized Autoregressive Conditional Correlation," Econometric Theory, Cambridge University Press, vol. 24(06), pages 1554-1583, December.
  19. Richard D. F. Harris & Evarist Stoja & Jon Tucker, 2007. "A simplified approach to modeling the co‐movement of asset returns," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 27(6), pages 575-598, 06.
  20. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
Full references (including those not matched with items on IDEAS)

The CitEc project has not yet found citations to this item.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:kyo:wpaper:838. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ryo Okui)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.