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Title
Financial Crises And International Stock Market Volatility Transmission
Fields of Research (FoR) 2008:
Author(s)
Publication Date
2010
Socio-Economic Objective (SEO) 2008
Abstract
This paper examines the interplay between stock market returns and their volatility, focusing on the Asian and global financial crises of 1997-98 and 2008-09 for Australia, Singapore, the UK, and the US. We use a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model and weekly data (January 1992-June 2009). Based on the results obtained from the mean return equations, we could not find any significant impact on returns arising from the Asian crisis and more recent global financial crises across these four markets. However, both crises significantly increased the stock return volatilities across all of the four markets. Not surprisingly, it is also found that the US stock market is the most crucial market impacting on the volatilities of smaller economies such as Australia. Our results provide evidence of own and cross ARCH and GARCH effects among all four markets, suggesting the existence of significant volatility and cross volatility spillovers across all four markets. A high degree of time-varying co-volatility among these markets indicates that investors will be highly unlikely to benefit from diversifying their financial portfolio by acquiring stocks within these four countries only.
Publication Type
Journal Article
Source of Publication
Australian Economic Papers, 49(3), p. 209-221
Publisher
Blackwell Publishing Ltd
Place of Publication
Australia
ISSN
1467-8454
0004-900X
Peer Reviewed
Yes
HERDC Category Description
Peer Reviewed
Yes
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