scholarly journals An Empirical Analysis of the Volatility Spillover Effect between World-Leading and the Asian Stock Markets: Implications for Portfolio Management

2020 ◽  
Vol 13 (10) ◽  
pp. 226
Author(s):  
Imran Yousaf ◽  
Shoaib Ali ◽  
Wing-Keung Wong
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Stock Markets ◽  
Chinese Stock Market ◽  
Stock Market Crash ◽  
Optimal Weights ◽  
Hedge Ratios ◽  
The Us ◽  
The Usa ◽  
Us Financial Crisis

This study employs the Vector Autoregressive-Generalized Autoregressive Conditional Heteroskedasticity (VAR-AGARCH) model to examine both return and volatility spillovers from the USA (developed) and China (Emerging) towards eight emerging Asian stock markets during the full sample period, the US financial crisis, and the Chinese Stock market crash. We also calculate the optimal weights and hedge ratios for the stock portfolios. Our results reveal that both return and volatility transmissions vary across the pairs of stock markets and the financial crises. More specifically, return spillover was observed from the US and China to the Asian stock markets during the US financial crisis and the Chinese stock market crash, and the volatility was transmitted from the USA to the majority of the Asian stock markets during the Chinese stock market crash. Additionally, volatility was transmitted from China to the majority of the Asian stock markets during the US financial crisis. The weights of American stocks in the Asia-US portfolios were found to be higher during the Chinese stock market crash than in the US financial crisis. For the majority of the Asia-China portfolios, the optimal weights of the Chinese stocks were almost equal during the Chinese stock market crash and the US financial crisis. Regarding hedge ratios, fewer US stocks were required to minimize the risk for Asian stock investors during the US financial crisis. In contrast, fewer Chinese stocks were needed to minimize the risk for Asian stock investors during the Chinese stock market crash. This study provides useful information to institutional investors, portfolio managers, and policymakers regarding optimal asset allocation and risk management.

scholarly journals Linkages between gold and emerging Asian stock markets: New evidence from the Chinese stock market crash

2021 ◽  
Vol 39 (2) ◽  
Author(s):  
Imran Yousaf ◽  
Shoaib Ali
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Chinese Stock Market ◽  
Stock Market Crash ◽  
Volatility Spillovers ◽  
Hedge Ratios ◽  
The Global Financial Crisis ◽  
New Evidence

This study examines the return and volatility transmission between gold and nine emerging Asian Stock Markets during the global financial crisis and the Chinese stock market crash. We use the VAR-AGARCH model to estimate return and volatility spillovers over the period from January 2000 through June 30, 2018. The results reveal the substantial return and volatility spillovers between the gold and emerging Asian stock markets during the global financial crisis and the Chinese stock market crash. However, these return and volatility transmissions vary across the pairs of stock markets and the financial crises. Besides, we analyze the optimal portfolios and hedge ratios between gold and emerging Asian stock markets during all sample periods. Our findings have important implications for effective hedging and diversification strategies, asset pricing and risk management.

Linkages between gold and emerging Asian stock markets: New evidence from the Chinese stock market crash

2020 ◽  
Vol 39 (1) ◽  
Author(s):  
Imran Yousaf ◽  
Shoaib Ali
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Chinese Stock Market ◽  
Stock Market Crash ◽  
Volatility Spillovers ◽  
Hedge Ratios ◽  
The Global Financial Crisis ◽  
New Evidence

This study examines the return and volatility transmission between gold and nine emerging Asian Stock Markets during the global financial crisis and the Chinese stock market crash. We use the VAR-AGARCH model to estimate return and volatility spillovers over the period from January 2000 through June 30, 2018. The results reveal the substantial return and volatility spillovers between the gold and emerging Asian stock markets during the global financial crisis and the Chinese stock market crash. However, these return and volatility transmissions vary across the pairs of stock markets and the financial crises. Besides, we analyze the optimal portfolios and hedge ratios between gold and emerging Asian stock markets during all sample periods. Our findings have important implications for effective hedging and diversification strategies, asset pricing and risk management.

Return and Volatility Transmissions between Metals and Stocks: A Study of the Emerging Asian Markets by Using the VAR-AGARCH Approach

2020 ◽  
pp. 2040020
Author(s):  
Imran Yousaf ◽  
Shoaib Ali ◽  
Wing-Keung Wong
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Precious Metals ◽  
Entire Period ◽  
Chinese Stock Market ◽  
Stock Market Crash ◽  
Hedge Ratios ◽  
The Global Financial Crisis ◽  
Industrial Metals

This study examines the return and volatility transmission/spillover between (Precious and Industrial) metals and stocks in the emerging Asian markets in the entire studying period and the two crisis sub-periods: the global financial crisis (GFC) and the Chinese Stock market crash sub-periods, and the normal sub-period that does not have any crisis. In addition, we estimate the optimal weights and hedge ratios for both metals and stocks. Employing the VAR-AGARCH model to estimate spillover, the results reveal the unidirectional return spillover from both precious and industrial metals to most of the Asian equity markets in the entire period as well as in the GFC and normal sub-periods but not the sub-period of the Chinese stock market crash. Besides, we reveal that there are unidirectional or bidirectional volatility transmissions between most of the precious metals and the Asian stock markets during the entire period and all the sub-periods. In contrast, the volatility spillover is not significant between most of the industrial metals and Asian stock markets during the entire period and all the sub-periods. On the other hand, our analysis on both optimal weight and hedge ratios suggests that adding nearly any metal to a portfolio of emerging Asian stocks improves its risk-adjusted return and helps to effectively hedge against stock risk exposure over both crisis and non-crisis sub-periods. Overall, these findings provide useful insights for portfolio diversification, asset pricing, and risk management.

Volatility spillover from the Chinese stock market to E7 and G7 stock markets

2019 ◽  
Vol 46 (1) ◽  
pp. 90-105 ◽  
Author(s):  
Berna Kirkulak Uludag ◽  
Muzammil Khurshid
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Volatility Spillover ◽  
Chinese Stock Market ◽  
G7 Countries ◽  
Content Type ◽  
Government Interventions ◽  
Vector Autoregressive ◽  
Optimal Weights ◽  
Hedge Ratios

PurposeThe purpose of this paper is to examine volatility spillover from the Chinese stock market to E7 and G7 stock markets. Using the estimated results, the authors also analyze the optimal weights and optimal hedge ratios for the portfolios including stocks from E7 and G7 countries.Design/methodology/approachThe authors employed generalized vector autoregressive-generalized autoregressive conditional heteroskedasticity approach, developed by Ling and McAleer (2003), in order to analyze daily data on the national stock indices. Considering the late establishment of some E7 stock markets, the sampling covers the period from 1995 through 2015.FindingsThe findings indicate significant volatility spillover from the Chinese stock market to E7 and G7 stock markets. In particular, the Chinese stocks highly co-move with the stocks of countries within a same geographical region. While the highest volatility spillover occurs between China and India among E7 countries, the highest volatility spillover occurs between China and Japan among G7 countries. Furthermore, the examination of optimal weights and hedge ratios suggest that investors should hold more stocks from G7 countries than E7 countries for their portfolios.Originality/valueTo the best of the authors’ knowledge, this is the first study which investigates the volatility spillover in the stock markets of G7 and E7 countries. Moreover, the current study contributes particularly to the existing limited literature on the Chinese stock market. Since the Chinese stock market is not fully integrated to other markets and it is subject to intense government interventions, there is a widely accepted belief that the contagion effects from the Chinese stock market to other stock markets are not influential. This view discourages and limits the prospect studies. However, the findings of this paper refute this view and indicate significant interaction among the Chinese stock market and E7 and G7 stock markets.

scholarly journals Predicting Contagion from the US Financial Crisis to International Stock Markets Using Dynamic Copula with Google Trends

Mathematics ◽  
2019 ◽  
Vol 7 (11) ◽  
pp. 1032 ◽  
Author(s):  
Maneejuk ◽  
Yamaka
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Stock Markets ◽  
Google Trends ◽  
Time Varying ◽  
International Stock Markets ◽  
Leading Indicator ◽  
Dynamic Copula ◽  
The Us ◽  
Us Financial Crisis

The accuracy of contagion prediction has been one of the most widely investigated and challenging problems in economic research. Much effort has been devoted to investigating the key determinant of contagion and enhancing more powerful prediction models. In this study, we aim to improve the prediction of the contagion effect from the US stock market to the international stock markets by utilizing Google Trends as a new leading indicator for predicting contagion. To improve this contagion prediction, the dynamic copula models are used to investigate the structure of dependence between international markets and the US market, before, during, and after the occurrence of the US financial crisis in 2008. We also incorporate the Google Trends data as the exogenous variables in the time-varying copula equation. Thus, the ARMAX process is introduced. To investigate the predictive power of Google Trends, we employ the likelihood ratio test. Our empirical findings support that Google Trends is a significant leading indicator for predicting contagion in seven out of 10 cases: SP-FTSE, SP-TSX, SP-DAX, SP-Nikkei, SP-BVSP, SP-SSEC, and SP-BSESN pairs. Our Google-based models seem to predict particularly well the effect of the US crisis in 2008. In addition, we find that the contribution of Google Trends to contagion prediction varies among the different stock market pairs. This finding leads to our observation that the more volatile the market time-varying correlation, the more useful Google Trends.

scholarly journals Return and Volatility Transmission between World-Leading and Latin American Stock Markets: Portfolio Implications

2020 ◽  
Vol 13 (7) ◽  
pp. 148 ◽  
Author(s):  
Imran Yousaf ◽  
Shoaib Ali ◽  
Wing-Keung Wong
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Latin American ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Volatility Spillover ◽  
Chinese Stock Market ◽  
Volatility Transmission ◽  
The Us ◽  
The Global Financial Crisis

This study uses the BEKK-GARCH model to examine the return-and-volatility spillover between the world-leading markets (USA and China) and four emerging Latin American stock markets over the global financial crisis of 2008 and the crash of the Chinese stock market of 2015. Regarding return spillover, our findings reveal a unidirectional return transmission from Mexico to the US stock market during the global financial crisis. During the crash of the Chinese stock market, the return spillover is found to be unidirectional from the US to the Brazil, Chile, Mexico, and Peru stock markets. Moreover, the results indicate a unidirectional return transmission from China to the Brazil, Chile, Mexico, and Peru stock markets during the global financial crisis and the crash of the Chinese stock market. Regarding volatility spillover, the results show the bidirectional volatility transmission between the US and the stock markets of Chile and Mexico during the global financial crisis. During the Chinese crash, the bidirectional volatility transmission is observed between the US and Mexican stock markets. Furthermore, the volatility spillover is unidirectional from China to the Brazil stock market during the global financial crisis. During the Chinese crash, the volatility spillover is bidirectional between the China and Brazil stock markets. Lastly, a portfolio analysis application has been conducted.

Measuring Dependence Between the USA and the Asian Economies: A Time-varying Copula Approach

2019 ◽  
Vol 20 (4) ◽  
pp. 962-980 ◽  
Author(s):  
Shegorika Rajwani ◽  
Dilip Kumar
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Tail Dependence ◽  
Time Varying ◽  
The Us ◽  
Asian Economies ◽  
Copula Approach

During the past few years, many of the financial markets have gone through devastating effects due to the crisis in one or the other economy of the world. The recent global financial crisis has triggered dramatic movements in various stock markets which may arise from interdependence or contagion between the markets. This article attempts to measure the contagion between the equity markets of Asia and the US stock market. The countries considered in the Asian group are China, India, Indonesia, South Korea, Taiwan, Hong Kong, Malaysia and Japan. Most of the Asian economies have experienced drastic higher volatility and uncertainty in the financial markets. If the markets are contagious, then the investors will be unable to reap benefits through international diversification of the portfolio. In such a case, the policymakers will further frame policies so that they can insulate themselves from inflicting heavy damage from various crises. To achieve our goal, we make use of the time-varying copula approach which helps us to study the joint behaviour of the series based on their marginal distribution. Time-varying copula approach can also capture the non-linear dependence in the series and exhibits a rich pattern of tail behaviour. Our findings support the contagion between the Asian stock markets and the US stock market during the global financial crisis. This article also highlights that the increased tail dependence is an important factor for the contagion between the Asian stock markets and the US market.

Intensity of shock transmission amid US-BRICS markets

2015 ◽  
Vol 10 (3) ◽  
pp. 311-328 ◽  
Author(s):  
P. Lakshmi ◽  
S. Visalakshmi ◽  
Kavitha Shanmugam
Keyword(s):  
Stock Market ◽  
Granger Causality ◽  
Stock Markets ◽  
Subprime Mortgage ◽  
Content Type ◽  
Brics Countries ◽  
Long Run ◽  
The Us ◽  
The Usa ◽  
Short Run

Purpose – The purpose of this paper is to analyze the intensity of transmission of shocks from USA to BRICS countries in the long-run and short-run deviations and swiftness of recovery during US subprime mortgage crisis. This analysis enables the authors to explore the evolving patterns of relationships between these markets and examine whether their co-movements altered either in response to international shocks that originated in advanced markets like USA or due to their domestic fluctuations. Design/methodology/approach – Employing data of daily stock market indices (open and close) of BRICS countries for the period January 2, 2001 to May 31, 2012, this paper examines the interactions and characteristics of price movements of BRICS with US market by applying co-integration tests, vector error correction model and Granger causality relationship. The daily stock market indices data are derived from respective stock exchange web sites. Findings – The results exhibit that both long-run co-integration relationships and short-run Granger causality relationships exist between the stock markets of US-BRICS. Furthermore, this nexus is amplified in the short-run during 2007-2009, when the subprime mortgage financial crisis in the USA cropped up. This finding lends support to the prominence of developed (US) market links in the proliferation of persistent co-movements of BRICS stock markets. Research limitations/implications – The findings imply an increasing degree of global market integration due to quick dissemination of global shocks originating from developed market like USA, and swift recovery which can be attributed to the increased resilience, consistent with the moderated level of domestically driven risk in the BRICS markets. In spite of their similarities, long-run and short-run interdependences with the US stock market exhibit differences among the BRICS. This can be attributed to the regional heterogeneity in long-run risk and return co-movements with the USA. Practical implications – Changes from the US index easily affect these stock markets in the short-run, which implies that the US index may act as a leading indicator for investing funds in BRICS markets. Originality/value – This study would enable the authors to understand whether BRICS economies actually remain resilient to adverse developments in USA and could serve as alternative investment destinations for global portfolio diversification.

scholarly journals International Stock Market Comovements: What Happened during the Financial Crisis?

2012 ◽  
Vol 12 (1) ◽  
pp. 1850252 ◽  
Author(s):  
Roman Horvath ◽  
Petr Poldauf
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Equity Returns ◽  
Multivariate Garch ◽  
Garch Models ◽  
Chinese Stock Market ◽  
Common Shock ◽  
The Usa ◽  
Multivariate Garch Models ◽  
The Uk

We investigate the stock market comovements in Australia, Brazil, Canada, China, Germany, Hong Kong, Japan, Russia, South Africa, the UK, and the USA, both at the market and sectoral level in 2000-2010. Using multivariate GARCH models, our results suggest that the correlation among equity returns during the financial crisis (2008-2010) somewhat increased, suggesting that the crisis represented a common shock to all countries. The U.S. stock market is found to be the most correlated with the stock markets in Brazil, Canada and UK. The correlation of U.S. and Chinese stock market is essentially zero before the crisis; it becomes slightly positive during the crisis. The sectoral indices are less correlated than the market indices over the whole period, but, again, the correlations increase during the crisis.

scholarly journals Financial Risk Contagion in Stock Markets: Causality and Measurement Aspects

2019 ◽  
Vol 11 (5) ◽  
pp. 1402 ◽  
Author(s):  
Guoxiang Xu ◽  
Wangfeng Gao
Keyword(s):  
Stock Market ◽  
Emerging Markets ◽  
Stock Markets ◽  
Financial Risk ◽  
Tail Dependence ◽  
Chinese Stock Market ◽  
Contagion Effect ◽  
Subprime Mortgage ◽  
Stock Market Crash ◽  
Mortgage Crisis

As global financial markets become highly dependent on each other, risk contagion among stock markets is a primary feature of progressing globalization, which poses uncertainties for government agencies. The deficiency of previous studies is that it is difficult to accurately grasp the direction of risk diffusion in different time periods, and to depict the intensity of risk contagion constantly. Research on causality and measurement of financial risk contagion based on nonlinear causality tests and dynamic Copula methods will help governments to allocate financial resources reasonably and effectively, thus promoting the sustainable development of the social economy and financial markets. Taking the Chinese stock market as an example, this paper evaluated the risk contagion effect between the Chinese stock market and six other stock markets including developed and emerging markets from January 2006 to December 2018. From the aspect of causality, the nonlinear Granger causality test was applied to the entire time period and the phased time periods involving specific events like the subprime mortgage crisis and the Chinese stock market crash. From the aspect of measurement, the dynamic Markov state transition Copula model was used to describe the asymmetrically dependent structure of markets, from which was derived the time-varying lower tail dependence coefficients. The results have been summarized as follows. Firstly, after the outbreak of the subprime mortgage crisis, the stock markets in developed and emerging markets unilaterally affected the Chinese stock market, indicating that China was the recipient at this stage. Then, after the outbreak of the Chinese stock market crash, the Chinese stock market had a risk contagion effect on both Japanese and Russian stock markets, indicating that China became a source of financial risk contagion within a limited area at this stage. Lastly, in terms of the degree of risk contagion, the lower tail dependence coefficients of the Chinese stock market and other markets were significantly increased after the occurrence of specific risk events, while the risk contagion degree of developed markets was higher than that of emerging markets. Policymakers can recognize and apply the characteristics of risk contagion at different stages to refrain from unreasonable institutional arrangements, thus improving the sustainability of economic development.

Sign in / Sign up

Export Citation Format

Share Document