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The impact of trade intensity and Market characteristics on asymmetric volatility, spillovers and asymmetric spillovers: Evidence from the response of international stock markets to US shocks

Mohammad Khaleq Newaz and Jin Suk Park

The Quarterly Review of Economics and Finance, 2019, vol. 71, issue C, 79-94

Abstract: This study examines the relationship between trade intensity and three stock market phenomena: asymmetric volatility, spillovers and asymmetric spillovers between the US and 74 international stock markets. The evidence is provided based on the cross-market models using the various measures from multivariate volatility models and the spillover indices. As stock trading gets more intensive, the market volatility responds proportionally stronger to a negative domestic shock than a positive one. Trade intensity also increases the spillovers of US shocks to the local markets. However, its impact diminishes at a higher level. Regarding other market characteristics, geographical distance, representing transaction costs or psychological /cultural obstacles, has a significant negative association with spillovers and the asymmetric spillovers. Less negative skewness, as stronger short-selling constraints, is associated with weaker spillovers. More volatile markets are generally linked to stronger asymmetries and spillovers.

Keywords: Asymmetric volatility; Asymmetric spillovers; Spillovers; Trade intensity (search for similar items in EconPapers)
JEL-codes: G01 G14 G15 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:quaeco:v:71:y:2019:i:c:p:79-94