TITLE:
Stock Market Linkages and Spillover Effects: An Empirical Analysis of Select Asian Markets
AUTHORS:
Sanjay Sehgal, Kumar Bijoy, Sakshi Saini
KEYWORDS:
Asian Stock Markets, ADCC-GARCH, Chinese Meltdown, Diebold-Yilmaz, Return Spillover, Volatility Spillover
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.5,
June
19,
2019
ABSTRACT: This study tries to find the dynamic stock market
linkages among 12 Asian countries over the period January 3, 2000 to June 20,
2017. We employ ADCC-GARCH model to study the conditional correlations and
Diebold and Yilmaz (2012) spillover index methodology to investigate return and
volatility spillovers across the sample markets [1]. Based on ADCC results, we find that Singapore exhibits highest
conditional correlation with other sample markets. Dynamic conditional
correlations across the markets amplify during the crisis periods, pointing to
financial contagion. The findings under Diebold-Yilmaz framework corroborate
with the ADCC-GARCH model results as Singapore is found to be the dominant
market based on both return and volatility spillovers. Inter-temporal pattern
of spillovers reveals that cross-market linkages intensify during the turmoil
periods. Our results have important implications for international investors
and policymakers. The study contributes to financial integration literature for
Asian markets.