On Volatility Spillovers and Dominant Effects in East Asian: Before and After the 911
The present paper examines the dynamic effects of volatility spillovers and dominant role (the second-moment) of the US, Japan and Hong Kong in the East Asian equity markets. To evaluate the recent September 11 (911) impact, two sub periods – before and after the tragedy, are being considered based on daily market returns. The upshots of our findings are five-fold. First, for all markets the constant risk components, as well as the ARCH and GARCH effects are significantly detected, implying the persistency of volatility in East Asian equity markets. Nevertheless, not all indexes show asymmetrical news effects. Though all indexes show leverage effects, they are significant only for certain countries including the US and Japan, which is consistent with empirical literature. Second, the volatilities of these equity markets are bounded in common stochastic trends, at least in the long run. Third, the Hong Kong long run coefficients are more significant than that of US or Japan before the 911 calamity. Nonetheless, there is sufficient evidence showing that the US spillovers were transmitted via Hong Kong. After the 911, the Hong Kong’s spillovers trim down while Japanese influence enhance as in Malaysia, Philippines, Thailand and Singapore. Taken as a whole (1998-2002), Japanese spillovers are relatively small and nonsignificant in some East Asian equity markets. Fourth, the ECT coefficients are significant but small (except for Hong Kong). The East Asian equity markets are thereby endogenously determined and the volatility adjustments to the long run equilibrium are slow, once being shocked. The ECT coefficients slightly improved after 911. Fifth, volatilities in the East Asian equity markets are attributed mainly to the shocks of local and regional factors rather than the world factor. In a nutshell, the volatility spillovers and the Hong Kong- and US-dominant effects have been confirmed. Hitherto, the 911 impact is relatively small and somewhat inconclusive.
|Date of creation:||2003|
|Date of revision:||2006|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Cheung, Yin-Wong & Ng, Lilian K., 1996. "A causality-in-variance test and its application to financial market prices," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 33-48.
- Brooks, C. & Henry, O.T., 1999.
"Linear and Non-Linear Transmission of Equity Return Volatility: Evidence From the US, Japan, and Australia,"
Department of Economics - Working Papers Series
676, The University of Melbourne.
- Brooks, Chris & Henry, Olan T., 2000. "Linear and non-linear transmission of equity return volatility: evidence from the US, Japan and Australia," Economic Modelling, Elsevier, vol. 17(4), pages 497-513, December.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
- John Wei, K. C. & Liu, Yu-Jane & Yang, Chau-Chen & Chaung, Guey-Shiang, 1995. "Volatility and price change spillover effects across the developed and emerging markets," Pacific-Basin Finance Journal, Elsevier, vol. 3(1), pages 113-136, May.
- Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
- Ng, Angela, 2000. "Volatility spillover effects from Japan and the US to the Pacific-Basin," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 207-233, April.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:2032. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.