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Modelling Volatility Spillover Effects Between Developed Stock Markets and Asian Emerging Stock Markets

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Abstract

This paper examines the linkages of stock markets across the U.S., Japan and six Asian developing countries: China, India, Indonesia, Malaysia, the Philippines and Thailand over the period January 1, 1993 to December 31, 2012. The volatility spillover is modeled through an asymmetric multivariate GARCH model. We find significant unidirectional shock and volatility spillovers from the U.S. market to both the Japanese and the Asian emerging markets. It is also found that the volatility spillovers between the U.S. market and the Asian markets are stronger and bidirectional during the Asian financial crisis. Further, during the last five years, the linkages between the Japanese market and the Asian emerging markets became more apparent. Our paper contributes to the literature by examining both the long run and the short run periods and focusing on shock and volatility spillovers rather than return spillovers, which have been the primary focus of most other studies.

Suggested Citation

  • David E. Giles & Yanan Li, 2013. "Modelling Volatility Spillover Effects Between Developed Stock Markets and Asian Emerging Stock Markets," Econometrics Working Papers 1301, Department of Economics, University of Victoria.
  • Handle: RePEc:vic:vicewp:1301
    Note: ISSN 1485-6441
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    References listed on IDEAS

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    1. Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
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    1. repec:eee:phsmap:v:490:y:2018:i:c:p:1555-1574 is not listed on IDEAS
    2. Baumöhl, Eduard & Kočenda, Evžen & Lyócsa, Štefan & Výrost, Tomáš, 2018. "Networks of volatility spillovers among stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 1555-1574.
    3. repec:beo:journl:v:62:y:2017:i:212:p:63-84 is not listed on IDEAS
    4. Baruník, Jozef & Kočenda, Evžen & Vácha, Lukáš, 2016. "Asymmetric connectedness on the U.S. stock market: Bad and good volatility spillovers," Journal of Financial Markets, Elsevier, vol. 27(C), pages 55-78.
    5. repec:rjr:romjef:v::y:2017:i:3:p:110-129 is not listed on IDEAS
    6. repec:bor:bistre:v:17:y:2017:i:1:p:25-48 is not listed on IDEAS
    7. repec:eee:finana:v:53:y:2017:i:c:p:94-111 is not listed on IDEAS
    8. repec:spr:jqecon:v:16:y:2018:i:1:d:10.1007_s40953-016-0067-y is not listed on IDEAS
    9. repec:taf:oaefxx:v:4:y:2016:i:1:p:1266788 is not listed on IDEAS
    10. Babajide Fowowe & Mohammed Shuaibu, 2016. "Dynamic spillovers between Nigerian, South African and international equity markets," International Economics, CEPII research center, issue 148, pages 59-80.
    11. Withanage, Yeshan & Jayasinghe, Prabhath, 2017. "Volatility Spillovers between South Asian Stock Markets: Evidence from Sri Lanka, India and Pakistan," MPRA Paper 82782, University Library of Munich, Germany, revised Nov 2017.

    More about this item

    Keywords

    Volatility; Spillovers; Stock markets; Multivariate GARCH; Asymmetric BEKK model;

    JEL classification:

    • 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
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G1 - Financial Economics - - General Financial Markets

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