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Shift-Volatility Transmission in East Asian Equity Markets

Author

Listed:
  • Marcel Aloy

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

  • Gilles de Truchis

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

  • Gilles Dufrénot

    (Banque de France, CEPII, Aix-Marseille School of Economics, Aix-Marseille University)

  • Benjamin Keddad

    (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

Abstract
This paper attempts to provide evidence of “shift-volatility” transmission in the East Asian equity markets. By shift-volatility, we mean the volatility shifts from a low level to a high level, corresponding respectively to tranquil and crisis periods. We examine the interdependence of equity volatilities between Hong-Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, Thailand and the United States. Our main issue is whether shift-volatility needs to be considered as a regional phenomenon, or from a more global perspective. We find that the timing/spans of high volatility regimes correspond adequately to years historically documented as those of crises (the Asian crisis and the years following the 2008 crisis). Moreover, we suggest different indicators that could be useful to guide the investors in their arbitrage behavior in the different regimes: the duration of each state, the sensitivity of the volatility in a market following a change in the volatility in another market. Finally, we are able to identify which market can be considered as leading markets in terms of volatility.

Suggested Citation

  • Marcel Aloy & Gilles de Truchis & Gilles Dufrénot & Benjamin Keddad, 2014. "Shift-Volatility Transmission in East Asian Equity Markets," AMSE Working Papers 1402, Aix-Marseille School of Economics, France, revised Mar 2014.
    • Handle: RePEc:aim:wpaimx:1402
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    References listed on IDEAS

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    Cited by:

    1. Keddad, Benjamin, 2019. "How do the Renminbi and other East Asian currencies co-move?," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 49-70.
    2. Gilles Truchis & Benjamin Keddad, 2016. "Long-Run Comovements in East Asian Stock Market Volatility," Open Economies Review, Springer, vol. 27(5), pages 969-986, November.

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    More about this item

    Keywords

    Regime shifts; Equity Volatility; East Asia; TVPMS;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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