Volatility transmission: What do Asia-Pacific markets expect?

Ahmed Shamiri, Zaidi Isa

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Purpose: The purpose of this paper is to investigate the international information transmission of return and volatility spillovers from US and Japan markets to Asia-Pacific markets using daily stock market return data covering the period (1991-2004). Design/methodology/approach: This paper considers a volatility spillover model by applying a bivariate Baba, Engle, Kraft and Kroner-Generalized Autoregressive Conditional Heteroskedastic model, for each of the Asia-Pacific countries against the Japan and the USA using daily returns for the period (1991-2004). Splitting the sample into two non-overlapping sub-samples, the paper investigates whether the efforts for more economic, monetary and financial integration have fundamentally altered the sources and intensity of volatility spillovers to the individual stock market. Findings: In the majority of the markets under scrutiny, we provide evidence of direct volatility spillovers, running mainly from the Japanese and US markets and pointing to more rapid information transmission during the recent years. First, the volatility of the Asia-Pacific markets is becoming influenced more by the US market for the recent years. Second, for international investors to get profits from the returns of Asia-Pacific securities, it is necessary to pay attention to the US market directly. Third, Korea, Singapore and Hong Kong are among the most Asia-Pacific markets vulnerable to shocks from US investors due to the large ratio of portfolio holding. However, implementing global hedging strategies on Asia-Pacific markets requires the information concerning the Japanese volatility behaviour. Originality/value: This paper should be of interest to a broad practitioners and academics including those interested in modelling volatility for financial market risk management.

Original languageEnglish
Pages (from-to)299-313
Number of pages15
JournalStudies in Economics and Finance
Volume27
Issue number4
DOIs
Publication statusPublished - Oct 2010

Fingerprint

Volatility transmission
Asia-Pacific
Volatility spillover
Japan
Information transmission
Investors
Stock market returns
Financial markets
Profit
Korea
Hong Kong
Singapore
Volatility modelling
Market risk
Hedging strategies
Risk management
Economic integration
Stock market
Conditional model
Monetary integration

Keywords

  • Australasia
  • Economic conditions
  • Japan
  • Pacific region
  • South East Asia
  • United States of America

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Cite this

Volatility transmission : What do Asia-Pacific markets expect? / Shamiri, Ahmed; Isa, Zaidi.

In: Studies in Economics and Finance, Vol. 27, No. 4, 10.2010, p. 299-313.

Research output: Contribution to journalArticle

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