The Volatility Comovement among Stock Markets in East Asian Countries

Abstract

Using daily indices for several East Asian and Asian emerging stock markets from 5 January 1995 to 31 December 2018, this study investigates the volatility comovement of the stock market returns in using the DCC-MGARCH model. The empirical results depict that the volatility comovement among East Asian stock markets have increased in recent years. Moreover, this correlation is stronger in the developed markets of Singapore, Hong Kong, Japan and Korea. Volatility comovement across emerging countries, namely, China, India, Thailand, Indonesia, Malaysia and Philippines, has also increased. This study also examines the volatility spillover effects in East Asia at different stages including the periods before and after the 2008 global financial crisis. We find that severe financial crises have positive and significant impacts on both volatility comovement and volatility spillover in East Asian financial markets. And after the crisis periods the cross-border correlations have become even more interconnected and complex, despite the fact that financial crisis tends to trigger higher degree of systematic integration and risk in East Asian stock markets.