Volatility Spillovers from Australia's major trading partners across the GFC

David Allen, Michael McAleer, Robert Powell and Abhay K. Singh

International Review of Economics & Finance, 2017, vol. 47, issue C, 159-175

Abstract: This paper features an analysis of volatility spillover effects from Australia's major trading partners, namely, China, Japan, Korea and the United States, for a period running from 1st January 2004 to 30th June 2014. This captures the impact of the Global Financial Crisis (GFC). These markets are represented by the following major indices: The Shanghai composite and the Hangseng. (in the case of China, as both China and Hong Kong appear in Australian trade statistics), the S&P500 index, the Nikkei225 and the Kospi index. We apply the Diebold and Yilmaz (2009) Spillover Index, constructed in a VAR framework, to assess spillovers across these markets in returns and in volatilities. The analysis confirms that the US and Hong Kong markets have the greatest influence on the Australian one. We then move to a GARCH framework to apply further analysis and apply a tri-variate Cholesky-GARCH model to explore the effects from the US and Chinese market, as represented by the Hang Seng Index. We further explore three sample sub-periods, Pre-GFC 2004/1/1/ until 2007/07/08/, GFC 2007/08/09 until 2010/05/07 and Post-GFC 2010/05/10 until 2014/06/20 and analyse the behaviour of time-varying conditional correlations in these sub-periods. The GARCH analysis re-affirms the strong influence of the Hang Seng Index and the S&P500 Index.

Keywords: Volatility Spillover Index; VAR analysis; Variance decomposition; Cholesky-GARCH (search for similar items in EconPapers)
JEL-codes: C58 G12 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Volatility Spillovers from Australia's major trading partners across the GFC (2014)
Working Paper: Volatility Spillovers from Australia's Major Trading Partners across the GFC (2014)
Working Paper: Volatility Spillovers from Australia's major trading partners across the GFC (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:47:y:2017:i:c:p:159-175

DOI: 10.1016/j.iref.2016.10.007

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