Volatility Spillovers between Chinese and World Equity Markets
36 Pages Posted: 20 Feb 2011 Last revised: 22 Mar 2011
Date Written: February 19, 2011
We propose measures of the total volatility spillover, the regional volatility spillovers of 11 countries, and the directional volatility spillovers between Chinese and world equity markets from February 1996 to December 2009, based on forecast-error variance decompositions in a generalized vector autoregressive framework given by Diebold and Yilmaz (2010). It is found that: 1) The Chinese stock market was little affected by other equity markets in the sample period. After 2005, the volatility of the Chinese market had a significantly positive impact on other markets; 2) The volatility interactions among the Chinese, Hong Kong and Taiwan markets are more prominent than those among the Chinese, Western and other Asian markets. The volatility spillovers among the Chinese, Japanese and Indian markets are more distinctive than those among the Chinese, US and UK markets; 3) The US market had dominant volatility impacts on other markets during the subprime mortgage crisis. While the other markets were very volatile, driven by the bad news, their huge volatility has been transmitted back to the US market; 4) The major correction of Chinese stock market between February and July 2007 significantly contributed to the volatility surges of other markets. Due to the restriction of foreign investment, the Chinese stock market has not been greatly affected in terms of market volatility during the crisis.
Keywords: China, World Equity Markets, Vector Autoregression, Variance Decomposition, Spillover Index, Financial Crisis
JEL Classification: G15, F36
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
On the Predictability of Chinese Stock Returns
By Xuanjuan Chen, Kenneth Kim, ...
Stock Market Liberalization and Market Returns in China: Evidence from Qfii Announcement
By Mou-fung Chan and Veicheng Yu
Market Segmentation and Information Diffusion in China's Stock Markets: Panel Data Unit Root and Cointegration Tests on a and B Share Prices
By Niklas Ahlgren, Boo Sjöö, ...
Volatility Spillovers between the US and the China Stock Markets: Structural Break Test with Symmetric and Asymmetric GARCH Approaches
By Gyu-hyun Moon and William Yu
China’s Stock Market Integration with a Leading Power and a Close Neighbor
Investment Strategies to Exploit Economic Growth in China
By Burton G. Malkiel, Jianping Mei, ...
Cross-Sectional Stock Return Predictability in China
By Nusret Cakici, Kalok Chan, ...
Under Pricing Determinants on Government Bond Auction in Indonesia
Stock Returns and Volatility Dynamics in China: Does the Control of State-Owned Enterprises (SOEs) Matter?
By Pornsawan Evans and David G. Mcmillan