Volatility Similarity and Spillover Effects in G20 Stock Market Comovements: An ICA-Based ARMA-APARCH-M Approach

Shanglei Chai, Zhen Zhang, Mo Du and Lei Jiang

Complexity, 2020, vol. 2020, 1-18

Abstract:

Financial internationalization leads to similar fluctuations and spillover effects in financial markets around the world, resulting in cross-border financial risks. This study examines comovements across G20 international stock markets while considering the volatility similarity and spillover effects. We provide a new approach using an ICA- (independent component analysis-) based ARMA-APARCH-M model to shed light on whether there are spillover effects among G20 stock markets with similar dynamics. Specifically, we first identify which G20 stock markets have similar volatility features using a fuzzy C-means time series clustering method and then investigate the dominant source of volatility spillovers using the ICA-based ARMA-APARCH-M model. The evidence has shown that the ICA method can more accurately capture market comovements with nonnormal distributions of the financial time series data by transforming the multivariate time series into statistically independent components (ICs). Our findings indicate that the G20 stock markets are clustered into three categories according to volatility similarity. There are spillover effects in stock market comovements of each group and the dominant source can be identified. This study has important implications for investors in international financial markets and for policymakers in G20 countries.

Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
http://downloads.hindawi.com/journals/8503/2020/8872307.pdf (application/pdf)
http://downloads.hindawi.com/journals/8503/2020/8872307.xml (text/xml)

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:hin:complx:8872307

DOI: 10.1155/2020/8872307

Access Statistics for this article

More articles in Complexity from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().