Transmission of Stock Returns and Volatility between the U.S. and Japan: Evidence from the Stock Index Futures Markets

Ming-Shiun Pan and L. Hsueh

Asia-Pacific Financial Markets, 1998, vol. 5, issue 3, 225 pages

Abstract: In this paper, we examine the nature of transmission of stock returns and volatility between the U.S. and Japanese stock markets using futures prices on the S&P 500 and Nikkei 225 stock indexes. We use stock index futures prices to mitigate the stale quote problem found in the spot index prices and to obtain more robust results. By employing a two-step GARCH approach, we find that there are unidirectional contemporaneous return and volatility spillovers from the U.S. to Japan. Furthermore, the U.S.'s influence on Japan in returns is approximately four times as large as the other way around. Finally, our results show no significant lagged spillover effects in both returns and volatility from the Osaka market to the Chicago market, while a significant lagged volatility spillover is observed from the U.S. to Japan. Copyright Kluwer Academic Publishers 1998

Keywords: spillover effect; nonsynchronous trading; stock index futures (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (9)

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DOI: 10.1023/A:1010000606092

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