Title: A study of US and China's volatility spillover effects on Hong Kong and Taiwan
Authors: Sheu, Her-Jiun
Cheng, Chien-Ling
Institute of Business and Management
Keywords: Stock market;volatility;spillover;VAR;MGARCH
Issue Date: 4-Jul-2011
Abstract: Many international investors have taken interest in the Hong Kong, Taiwan, and China stock markets for diversification to explore higher returns owing to their rapid economic growth and increased link with international capital markets over the past decades. As correlation is primary component for asset risk managing, asset pricing and portfolio allocating, which are concerns for investors, it is crucial to clarify the co-movement of these stock markets. The aim of this paper was to compare the effect of volatility of China and U.S. stock market respectively on the Taiwan and Hong Kong. Both vector autoregressive (VAR) and multivariate generalized autoregressive conditional heteroskedastic (MGARCH) model were employed for two separated sub-periods: 1996-2005 and 2006-2009. Results indicated that while China's rapid economic growth and its integration with Taiwan and Hong Kong, its stock market was considerably independent and its co-moments with other (international) markets were still not significant. It's useful information for investors that China stock market, with low co-moments with others, would be a good risk diversified investment and that U.S. stock market, with high co-moments with others, would be a good pricing indicator.
URI: http://hdl.handle.net/11536/14848
ISSN: 1993-8233
Volume: 5
Issue: 13
Begin Page: 5232
End Page: 5240
Appears in Collections:Articles