Interdependence of international equity variances: Evidence from East Asian markets |
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Affiliation: | 1. School of Management, University at Buffalo, The State University of New York, Buffalo, NY 14260, USA;2. School of Business, Sungkyunkwan University, Republic of Korea |
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Abstract: | This paper investigates the interdependence of volatility in six East Asian markets. We first model the returns in a VAR-BEKK framework to obtain the conditional variances, and then apply the vector-autoregressive model (VAR) to the six-market variances. The results of VAR estimation show that the interdependence of equity market conditional variances is high. The Japanese market, while being the most exogenous and the least susceptible to volatility stimuli from other markets, is the most influential in transmitting volatility to the other East Asian markets. |
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