Transmission of equity returns and volatility in Asian developed and emerging markets: a multivariate GARCH analysis

Andrew Worthington and Helen Higgs
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Helen Higgs: School of Economics and Finance, Queensland University of Technology, QLD 4001, Australia, Postal: School of Economics and Finance, Queensland University of Technology, QLD 4001, Australia

International Journal of Finance & Economics, 2004, vol. 9, issue 1, 71-80

Abstract: This paper examines the transmission of equity returns and volatility among Asian equity markets and investigates the differences that exist in this regard between the developed and emerging markets. Three developed markets (Hong Kong, Japan and Singapore) and six emerging markets (Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand) are included in the analysis. A multivariate generalized autoregressive conditional heteroskedasticity (MGARCH) model is used to identify the source and magnitude of spillovers. The results generally indicate the presence of large and predominantly positive mean and volatility spillovers. Nevertheless, mean spillovers from the developed to the emerging markets are not homogeneous across the emerging markets, and own-volatility spillovers are generally higher than cross-volatility spillovers for all markets, but especially for the emerging markets. Copyright © 2003 John Wiley & Sons, Ltd.

Date: 2004
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DOI: 10.1002/ijfe.222

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