Modelling volatility transmission in regional Asian stock markets

Tarana Azimova

The Journal of Economic Asymmetries, 2022, vol. 26, issue C

Abstract: In this paper, we investigate the mechanism of volatility transmission in five regional equity markets in Hong Kong, South Korea, Malaysia, Singapore, and Thailand using the multivariate EGARCH method. Our sample consists of daily stock return data for 10 industries over the period from 14 July 2015 to 29 May 2020. The empirical estimates provide evidence of significant volatility spillover among Asian stock industries. Our model shows that Asian equity industries, tend to exhibit volatility clustering in the conditional variance, and this volatility clustering is asymmetric in nature. The estimations show that Hong Kong, South Korea, Malaysia and Thailand play a more important role in the transmission of financial volatility compared to Singapore. The empirical analysis provides no evidence of an asymmetric effect and volatility persistence in Singapore stock markets. Moreover, the variance of the return series is constant, suggesting weak co-movement of volatility in Singapore with other Asian markets. The immediate practical implication of these empirical findings is that regional investment can bring about potential benefits through risk reduction and portfolio diversification.

Keywords: Volatility transmission; Multivariate EGARCH; Asian stock markets; Regional diversification (search for similar items in EconPapers)
JEL-codes: C58 G11 G15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1703494922000342
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:26:y:2022:i:c:s1703494922000342

DOI: 10.1016/j.jeca.2022.e00274

Access Statistics for this article

The Journal of Economic Asymmetries is currently edited by A.G. Malliaris

More articles in The Journal of Economic Asymmetries from Elsevier
Bibliographic data for series maintained by Catherine Liu ().