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Long and short-term volatility comovements in the East Asian stock

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Authors
Yang, Jin Yong; Lee, Sang-Heon; Yeo, In-Sung
Issue Date
2017-02-22
Publisher
REDFAME PUBLISHING
Citation
APPLIED ECONOMICS AND FINANCE Vol.4 No.3, pp. 14-19
Keywords
volatilityspilloverscomovementbivariate Markov-switching multifractal modelHamilton filter
Abstract
This study analyzed volatility comovement and contagion in the stock markets of four countries (China, Japan, Korea, and Taiwan) in East Asia, which are closely connected with each other geographically and economically in terms of short-term and long-term perspectives. The volatility of stock returns has complex properties of not only volatility clustering, but also long memory, regime change, and substantial outliers. This study reviewed the volatility comovement and contagion in a stock market from long-term and short-term perspectives with the Bivariate Markov Switching Multifractal (BMSM) volatility model that is known for explaining such characteristics well, in spite of using small number of parameters. The empirical analysis results are as follows: China has no significant correlation with the other three countries. Therefore, China stock market is regarded as isolated or segmented market. The influence of the financial crisis on East Asian countries varies depending on the country. Regardless of the starting point of the crisis, Korea and Taiwan are shown to be vulnerable to external impact, compared to China and Japan. From the perspective of the nature of crisis, financial crisis that occurred in 1997 in East Asia and South Europe in 2011 were identified as local shocks as they had an impact on only a few countries, while the global crisis in 2008 was identified as global shock because it caused significant short-term and/or mid and long-term volatility of all countries.
ISSN
2332-7294
Language
English
URI
http://hdl.handle.net/10371/117002
DOI
https://doi.org/10.11114/aef.v4i3.2087
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College of Dentistry/School of Dentistry (치과대학/치의학대학원)Dept. of Dentistry (치의학과)Journal Papers (저널논문_치의학과)
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