ASYMMETRIC INTERNATIONAL TRANSMISSION IN THE CONDITIONAL MEAN AND VOLATILITY TO THE JAPANESE MARKET FROM THE US: EGARCH VERSUS SV MODELS

Junji Shimada, Yoshihiko Tsukuda () and Tatsuyoshi Miyakoshi
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Junji Shimada: School of Management, Aoyama Gakuin University, Japan
Yoshihiko Tsukuda: Graduate School of Economics, Tohoku University, Kawachuchi, Aoba-ku, Sendai City, 890-8576, Japan
Tatsuyoshi Miyakoshi: Graduate School of Economics and Osaka School of International Public Policy (OSIPP), Osaka University, Japan

The Singapore Economic Review (SER), 2009, vol. 54, issue 01, 123-134

Abstract: This paper investigates whether the upturns and downturns of the US market exert asymmetric influence on the conditional mean and volatility of the Japanese market using the daily returns on stock price indices. Using both the EGARCH and SV models, which simultaneously allow two kinds of asymmetric international transmissions across the markets, the result reconfirms the symmetric transmission in the conditional mean obtained by Bahng and Shin (2003) and the asymmetric transmission in the conditional volatility obtained by Koutmos and Booth (1995) although each of them analyzed only one spillover effect separately. Although the EGARCH and SV models lead to similar results for the spillover effects, the SV model is preferred to the EGARCH model based on Lagrange Multiplier test for the hypothesis of the EGARCH against the SV. The shock to volatility in the US market with the SV model is asymmetrically transmitted to the volatility in the Japanese market.

Keywords: Asymmetric transmission; conditional mean and volatility; Japan and the US stock markets; EGARCH and SV models (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1142/S0217590809003227

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