Asymmetric International Transmission in the Conditional Mean and Volatility to the Japanese Market from the U.S.:EGARCH vs. SV Models

Junji Shimada, Yoshihiko Tsukuda and Tatsuyoshi Miyakoshi ()
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Junji Shimada: School of Management, Aoyama Gakuin University
Yoshihiko Tsukuda: Graduate School of Economics, Tohoku University
Tatsuyoshi Miyakoshi: Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University

No 07-23, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper investigates whether the upturns and downturns of the U.S. market exert asymmetric influence on the conditional mean and volatility of the Japanese market using the daily returns on stock price indices. Using both the EGARCH and SV models, which simultaneously allow two kinds of asymmetric international transmissions across the markets, the result reconfirms the symmetric transmission in the conditional mean obtained by Bahng and Shin (2003) and the asymmetric transmission in the conditional volatility obtained by Koutmos and Booth (1995) although each of them analyzed the only one spillover effect separately. Although the EGARCH and SV models lead to similar results about the spillover effects, the SV model is preferred to the EGARCH model in terms of the Lagrange Multiplier test of the EGARCH against the SV models. The shock to volatility in the U.S. market with the SV model is asymmetrically transmitted to the volatility in the Japanese market.

Keywords: asymmetric transmission; conditional mean and volatility; Japan and the U.S. stock markets; EGARCH and SV models (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2007-06
New Economics Papers: this item is included in nep-ets
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