Empirical Analysis of Interdependency and Volatility among Asian Stock Markets

Thomas C. Chiang and Christine X. Jiang
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Thomas C. Chiang: Marshall M. Austin, Drexel University, USA
Christine X. Jiang: Kent State University, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 1998, vol. 01, issue 04, 437-459

Abstract: This paper presents an integrated time series model to analyze the interdependence and volatility among five major Asian stock markets, including Taiwan, Hong Kong, Korea, Singapore, and Japan. The model accounts for autoregression, cross correlation, error correction term, and GARCH effect. The evidence indicates that these five Asian stock markets follow at least one common stochastic trend. The stock returns for four of these Asian markets are contemporaneously correlated with those of Japan, while their correlations with the US stock returns take a one-day lag. Our evidence also shows some dynamic adjustment involving an error correcting process. Finally, the GARCH effect is present in all of the variance equations although we fail to find the GARCH-in-mean supported by the data.

JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 1998
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DOI: 10.1142/S0219091598000260

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