Return and Volatility Spillover Across Equity Markets Between China and Southeast Asian Countries

Return and Volatility Spillover Across Equity Markets Between China and Southeast Asian Countries
Author: Hung Ngo
Publisher:
Total Pages: 16
Release: 2019
Genre:
ISBN:
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Purpose - This paper aims to study the daily returns and volatility spillover effects in common stock prices between China and four countries in Southeast Asia (Vietnam, Thailand, Singapore and Malaysia).Design/methodology/approach - The analysis uses a vector autoregression with a bivariate GARCHBEKK model to capture return linkage and volatility transmission spanning the period including the pre- and post-2008 Global Financial Crisis.Findings - The main empirical result is that the volatility of the Chinese market has had a significant impact on the other markets in the data sample. For the stock return, linkage between China and other markets seems to be remarkable during and after the Global Financial Crisis. Notably, the findings also indicate that the stock markets are more substantially integrated into the crisis.Practical implications - The results have considerable implications for portfolio managers and institutional investors in the evaluation of investment and asset allocation decisions. The market participants should pay more attention to assess the worth of across linkages among the markets and their volatility transmissions. Additionally, international portfolio managers and hedgers may be better able to understand how the volatility linkage between stock markets interrelated overtime; this situation might provide them benefit in forecasting the behavior of this market by capturing the other market information.Originality/value - This paper would complement the emerging body of existing literature by examining how China stock market impacts on their neighboring countries including Vietnam, Thailand, Singapore and Malaysia. Furthermore, this is the first investigation capturing return linkage and volatility spill over between China market and the four Southeast Asian markets by using bivariate VAR-GARCH-BEKK model. The authors believe that the results of this research's empirical analysis would amplify the systematic understanding of spillover activities between China stock market and other stock markets.

Return and Volatility Spillovers Among the East Asian Equity Markets

Return and Volatility Spillovers Among the East Asian Equity Markets
Author: Kamil Yılmaz
Publisher:
Total Pages:
Release: 2009
Genre:
ISBN:
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This article examines the extent of contagion and interdependence across the East Asian equity markets since early 1990s and compares the ongoing crisis with earlier episodes. Using the forecast error variance decomposition from a vector autoregression, we derive return and volatility spillover indices over the rolling sub-sample windows. We show that there is substantial difference between the behavior of the East Asian return and volatility spillover indices over time. While the return spillover index reveals increased integration among the East Asian equity markets, the volatility spillover index experiences significant bursts during major market crises, including the East Asian crisis. The fact that both return and volatility spillover indices reached their respective peaks during the current global financial crisis attests to the severity of the current episode. -- Stock returns ; Volatility ; Spillovers ; Vector autoregression ; Variance decomposition

Return and Volatility Spillovers Among Asian Stock Markets

Return and Volatility Spillovers Among Asian Stock Markets
Author: Prashant Mahesh Joshi
Publisher:
Total Pages: 8
Release: 2018
Genre:
ISBN:
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The study examines the return and volatility spillover among Asian stock markets in India, Hong Kong, Japan, China, Jakarta, and Korea using a six-variable asymmetric generalized autoregressive conditional heteroscedasticity-Baba, Engle, Kraft, and Kroner (GARCH-BEKK) model during February 2, 2007, to February 29, 2010. The author finds evidence of bidirectional return, shock, and volatility spillover among most of the stock markets. The magnitude of volatility linkages is low indicating weak integration of Asian stock markets. The study finds that own volatility spillover is higher than cross-market spillover. The overall persistence of stock market volatility is highest for Japan (0.931) and lowest for China (0.824). The implication of weak integration is that investors will benefit from reduction of diversifiable risk.

Volatility Spillover Among Stock Markets in Six Asian Countries and the United States

Volatility Spillover Among Stock Markets in Six Asian Countries and the United States
Author: Sang Jin Lee
Publisher:
Total Pages: 22
Release: 2009
Genre:
ISBN:
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This article examines the volatility spillover effects among six Asian country stock markets and the United States. The six Asian countries are India, Hong Kong, South Korea, Japan, Singapore, and Taiwan. This article also investigates whether the volatility spillover effect increased after the 1997 Asian financial crisis. There are statistically significant volatility spillover effects within the stock markets of these countries and that effect dramatically increased after the 1997 Asian financial crisis. Especially, the regionally close five countries Hong Kong, South Korea, Japan, Singapore, and Taiwan experienced more links among them.

Time-Varying Linkages of Economic Activities in China and the Stock Markets in ASEAN-5

Time-Varying Linkages of Economic Activities in China and the Stock Markets in ASEAN-5
Author: Kee Teng
Publisher:
Total Pages: 16
Release: 2016
Genre:
ISBN:
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This study attempts to investigate the evolution of dynamic linkages and volatility spillover between the five countries of the Association of Southeast Asian Nations (ASEAN-5) stock markets and China's economic activities. By using the movements and structural breaks of the time-varying correlation and Granger causality test, a suitable destination for equity portfolio diversification can be determined among the studied markets. This study covers monthly data from January 1991 to March 2015. The DCC-MGARCH model shows that the studied countries are time-varying correlated, while the structural break observed by Bai and Perron test coincided with major economic shocks, policy changes and the establishment of regional trade policies. The VAR model Granger causality test observed no volatility spillover from Chinese economic activities to the ASEAN-5 stock markets, except for Malaysia and the Philippines. However, the ASEAN-5 stock markets' volatility exerts a significant influence on China's economy, except for Singapore's stock market volatility. This study reveals that ASEAN-5 has gradually became the preferred destination for diversifying equity portfolios for investors in China.

Volatility Spillover Between the Chinese and Australian Stock Markets

Volatility Spillover Between the Chinese and Australian Stock Markets
Author: Wei Chi
Publisher:
Total Pages: 23
Release: 2015
Genre:
ISBN:
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Despite the increasingly tight economic relationship between China and Australia, little attention has been paid to the analysis of stock market volatility spillover across these two countries. This paper, based on industry data, fills the gap in the literature and provides a clear idea of the channels through which volatility is transmitted across countries. This paper finds that the volatility spillover across these two markets is bidirectional while there is single or insignificant spillover across industries between these two countries. More specifically, the results of the Granger causality test show that the stock market volatility spillover is bidirectional between these two markets in the financial, health care, industrials, information technology, and materials industries. One-way volatility spillover exists in the consumer staples industry and there is insignificant volatility spillover in the energy, telecommunications, and utilities industries between the Chinese and Australian stock markets.

Volatility Spillover Between the US, Chinese and Australian Stock Markets

Volatility Spillover Between the US, Chinese and Australian Stock Markets
Author: Emawtee Bissoondoyal-Bheenick
Publisher:
Total Pages: 36
Release: 2017
Genre:
ISBN:
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We assess the stock market volatility spillover between three closely related countries, United States, China and Australia. This study considers industry data and hence provides a clear idea of the channels through which volatility is transmitted across these countries. We find that there is significant bilateral causality between the countries at the market index level and across most of the industries for the full sample period from July 2007 to May 2016. There is one way volatility spillover from US to China in the financial services, industrials, consumer discretionary and utilities industry. There is insignificant volatility spillover from the Australian to Chinese stock markets in financial services, telecommunications and energy industries. Once we remove the effect of the GFC, we find significant bilateral relationship across all of the industries across the three countries.

Management of Shock and Volatility Spillover Effects Across Equity Markets

Management of Shock and Volatility Spillover Effects Across Equity Markets
Author: DR. MOHD. ASIF KHAN
Publisher:
Total Pages: 13
Release: 2020
Genre:
ISBN:
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This paper analyzes own and cross shock-volatility spillover effect among the very well known three Asian Stock Exchange Markets namely India, Singapore and South Korea during boom period, global recession period and post recession period. We use a multivariate BEKK-GARCH model to identify the source and magnitude of spillovers. The empirical analysis showed that the markets exhibit strong own shock (ARCH) and volatility (GARCH) effects in all the above mentioned three periods while regarding cross market spillover effect, India is playing a leading role in transmission of both Shocks as well as Volatility effect to the Singapore and South Korea markets. Thus, the international investors need to consider this strong integration regarding shock and volatility effects which reduce potential gains from international portfolio.

International Capital Flows

International Capital Flows
Author: Martin Feldstein
Publisher: University of Chicago Press
Total Pages: 500
Release: 2007-12-01
Genre: Business & Economics
ISBN: 0226241807
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Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.