Correlations in Returns and Volatilities in Pacific-Rim Stock Markets

Most studies on the correlations in stock returns and volatilities focus on the contemporaneous relationships and spillover effects in major stock markets such as the US and Japan. This paper adds to the literature by focusing on the dynamic relationship in the volatilities of the returns in the Pac...

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Bibliographic Details
Published inOpen economies review Vol. 11; no. 1; pp. 27 - 48
Main Authors Nicholas S.P. Tay, Zhu, Zhen
Format Journal Article
LanguageEnglish
Published Dordrecht Springer Nature B.V 01.01.2000
Subjects
Capital market
Causality
Confidence intervals
Correlation
Correlation analysis
Financial economics
Global economy
Multivariate analysis
Pacific Region
Rates of return
Securities markets
Spillovers
Stochastic models
Stock exchange
Stock exchanges
Stock returns
Studies
Variables
Volatility
Pacific Rim
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Summary:Most studies on the correlations in stock returns and volatilities focus on the contemporaneous relationships and spillover effects in major stock markets such as the US and Japan. This paper adds to the literature by focusing on the dynamic relationship in the volatilities of the returns in the Pacific-Rim stock markets. The causality in variances test method of Cheung and Ng (1996), a multivariate GARCH model and VAR analyses are employed to model conditional volatilities and study the dynamic responses of volatilities to innovations in conditional variances. The results suggest that while the stock markets are correlated in returns and volatilities contemporaneously and with lags, idiosyncratic factors play important roles in national stock markets. In addition, the dynamic adjustment of the market return volatilities can take a much longer time than previously reported in some of the countries studied. [PUBLICATION ABSTRACT]
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
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ISSN:0923-7992
1573-708X
DOI:10.1023/A:1008349012883