Volatility Spillover between the US, Chinese and Australian Stock Markets
36 Pages Posted: 20 Jul 2017
Date Written: July 16, 2017
We assess the stock market volatility spillover between three closely related countries, United States, China and Australia. This study considers industry data and hence provides a clear idea of the channels through which volatility is transmitted across these countries. We find that there is significant bilateral causality between the countries at the market index level and across most of the industries for the full sample period from July 2007 to May 2016. There is one way volatility spillover from US to China in the financial services, industrials, consumer discretionary and utilities industry. There is insignificant volatility spillover from the Australian to Chinese stock markets in financial services, telecommunications and energy industries. Once we remove the effect of the GFC, we find significant bilateral relationship across all of the industries across the three countries.
Keywords: Volatility Spillover; Granger Causality Test; Realized Volatility, Bi-Power Variation
JEL Classification: G15
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