The contagion effect of jump risk across Asian stock markets during the Covid-19 pandemic
Yajiao Chen and
The North American Journal of Economics and Finance, 2022, vol. 61, issue C
This paper tests the market jump contagion hypothesis in the context of the Covid-19 pandemic. We first use a nonparametric approach to identify jumps by decomposing the realized volatility into continuous and jump components, and we use the threshold autoregressive model to describe the jump interdependency structure between different markets. We empirically investigate the contagion effect across several major Asian equity markets (Mainland China, Hong Kong, Japan, South Korea, Singapore, Thailand, and Taiwan) using the 5-minute high frequency data. Some key findings emerge: jump behaviors occur frequently and make an important contribution to the total realized volatility; jump dynamics exhibit significant nonlinearity, asymmetry, and the feature of structural breaks, which can be effectively captured by the threshold autoregressive model; jump contagion effects are obviously detected and this effect varies depending on the regime.
Keywords: Market jump; Nonparametric approach; Jump contagion; Threshold autoregressive models (search for similar items in EconPapers)
JEL-codes: G11 G15 G19 G31 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:61:y:2022:i:c:s1062940822000432
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