Dynamic Correlation Analysis of Asian Stock Markets

Jae-Kwang Hwang ()

International Advances in Economic Research, 2012, vol. 18, issue 2, 227-237

Abstract: This paper examines the stock market linkages within the Asia-Pacific region and between Asian markets and the U.S. market over the period of January 2000 to June 2010, employing the dynamic conditional correlation GARCH model. Our results show that there exist very high correlations among the stock markets during the 2008 financial crisis. Therefore, consistent with the finding in literature, there are no diversification benefits during the financial crisis. However, our results show that there are still substantial opportunities for global investors to improve the risk-return performance between China and other markets during the sample period. In addition, we find evidence that the U.S. market significantly affects the stock markets in the Asia-Pacific region. Using T-GARCH model, there is a strong evidence of an asymmetric effect on conditional variance except stock markets in China and Malaysia. Copyright International Atlantic Economic Society 2012

Keywords: Stock market correlation; DCC model; T-GARCH; The 2008 financial crisis; G15 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s11294-012-9343-6

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