Volatility Dynamics of the Greater China Stock Markets: A Multivariate Asymmetric Approach

DOI

10.2991/jcis.2006.74How to use a DOI?

Keywords

Multivariate GARCH; Time-varying correlations; Volatility asymmetry and persistence

Abstract

This paper examines the volatility dynamics of the greater China stock markets (Shanghai A- and B-shares, Shenzhen A- and B-shares, Taiwan, and Hong Kong) by employing a multivariate (tetravariate) framework that incorporates the features of asymmetries, persistence, and time-varying correlations, which are typically observed in stock markets of developed economies. Specifically, we introduce two new multivariate GARCH models that do not nest each other: the Varying-Correlations (VC)-fractionally integrated asymmetric power ARCH (VC-FIAPARCH) and the VC-fractionally integrated asymmetric GARCH (VC-FIAGARCH) models. Our results indicate that, unlike the Shenzhen and Shanghai A-shares, Hong Kong, and Taiwan markets, both the B-share markets do not exhibit significant asymmetric volatility (“leverage effect”). Furthermore, return volatility in the A-share market is substantially higher than the B-share market before April 1997, but this result is reversed after that. Also, there is strong evidence of volatility persistence in all the markets, and this finding is robust to changes in model specification. It also appears possible that all the greater China stock markets share a common degree of persistence in volatility. Our examination of the correlation dynamics of these markets indicate that the Shenzhen and Shanghai stock exchanges are highly positively correlated with each other, with the strength of correlation increasing after the late nineties. Their correlations with the Hong Kong and Taiwanese markets, however, are much weaker and do not display any clear trends.

Copyright

© 2006, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Kin Yip Ho
PY  - 2006/10
DA  - 2006/10
TI  - Volatility Dynamics of the Greater China Stock Markets: A Multivariate Asymmetric Approach
BT  - Proceedings of the 9th Joint International Conference on Information Sciences (JCIS-06)
PB  - Atlantis Press
SN  - 1951-6851
UR  - https://doi.org/10.2991/jcis.2006.74
DO  - 10.2991/jcis.2006.74
ID  - Ho2006/10
ER  -