Return and Volatility Spillovers Effects: Study of Asian Emerging Stock Markets

Roni Bhowmik (), Abbas Ghulam () and Wang Shouyang ()
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Roni Bhowmik: Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China
Abbas Ghulam: School of Economics and Management, University of Chinese Academy of Sciences, Beijing, 100190, China
Wang Shouyang: Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, 100190, China

Journal of Systems Science and Information, 2018, vol. 6, issue 2, 97-119

Abstract: This paper examines the extent of contagion and interdependence across the six Asian emerging countries stock markets (e.g., Bangladesh, China, India, Malaysia, the Philippine, and South Korea) and then try to quantify the extent of the Asian emerging market fluctuations which are described by intra-regional contagion effect. These markets experienced both fast growth and key upheaval during the sample period, and thus, provide potentially rich information on the nature of border market interactions. Using the daily stock market index data from January 2002 to December 2016 (breaking the 15 years data set into three sub periods; pre-crisis, crisis, and post crisis periods); particularly make attention to the global financial crisis of 2007∼2008. The return and volatility spillovers are modeled through the GARCH (generalized autoregressive conditional heteroscedasticity), pairwise Granger causality tests, and the forecast error variance decomposition in a generalized VAR (vector auto regression) models. This paper shows that volatility and return spillovers behave very differently over time, during the pre-crisis, crisis, and post crisis periods. Importantly, Asian emerging stock markets interaction is less before the global financial crisis period. The return and volatility spillover indices touch their respective historical peaks during the global financial crisis 2007∼2008, however Bangladeshi market faces this condition in 2009∼2010.

Keywords: spillover; stock returns; volatility; global financial crisis; GARCH; Granger causality; variance decomposition (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:6:y:2018:i:2:p:97-119:n:1

DOI: 10.21078/JSSI-2018-097-23

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