Skip to main content
placeholder image

The effects of financial crises on international stock market volatility transmission

Conference Paper


Download full-text (Open Access)

Abstract


  • With the integration of national economies through international trade and finance, the

    exploration of financial market interdependency has become profoundly important among

    market participants and scholars. Focusing on the Asian and global financial crises of

    1997-98 and 2008-09 for Australia, Singapore, the UK, and the US, this paper examines

    the nature of such an interaction between stock market returns and their volatility. We use

    a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH)

    model and weekly data (January 1992-June 2009). Based on the results obtained from the

    mean return equations, we could not find any significant impact on returns arising from

    the Asian crisis and more recent global financial crisis across these four markets.

    However, both crises significantly increased the stock return volatilities across all of the

    four markets. Not surprisingly, it is also found that the US stock market is the most crucial

    market impacting on the volatilities of smaller economies such as Australia. Our results

    provide evidence of own and cross ARCH and GARCH effects among all four markets,

    suggesting the existence of significant volatility and cross volatility spillovers across all

    four markets. A high degree of time-varying co-volatility among these markets indicates

    that investors will be highly unlikely to benefit from diversifying their financial portfolio

    by acquiring stocks within these four countries only.

UOW Authors


  •   Karunanayake Athukoralalage, Indika P. (external author)
  •   Valadkhani, Abbas (external author)
  •   O'Brien, Martin

Publication Date


  • 2010

Citation


  • Karunanayake Athukoralalage, I., Valadkhani, A. & O''Brien, M. (2010). The effects of financial crises on international stock market volatility transmission. Economics Joint Scientific Conference (pp. 1-25). Korea: Korea Economic Association.

Ro Full-text Url


  • http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1017&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/18

Start Page


  • 1

End Page


  • 25

Abstract


  • With the integration of national economies through international trade and finance, the

    exploration of financial market interdependency has become profoundly important among

    market participants and scholars. Focusing on the Asian and global financial crises of

    1997-98 and 2008-09 for Australia, Singapore, the UK, and the US, this paper examines

    the nature of such an interaction between stock market returns and their volatility. We use

    a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH)

    model and weekly data (January 1992-June 2009). Based on the results obtained from the

    mean return equations, we could not find any significant impact on returns arising from

    the Asian crisis and more recent global financial crisis across these four markets.

    However, both crises significantly increased the stock return volatilities across all of the

    four markets. Not surprisingly, it is also found that the US stock market is the most crucial

    market impacting on the volatilities of smaller economies such as Australia. Our results

    provide evidence of own and cross ARCH and GARCH effects among all four markets,

    suggesting the existence of significant volatility and cross volatility spillovers across all

    four markets. A high degree of time-varying co-volatility among these markets indicates

    that investors will be highly unlikely to benefit from diversifying their financial portfolio

    by acquiring stocks within these four countries only.

UOW Authors


  •   Karunanayake Athukoralalage, Indika P. (external author)
  •   Valadkhani, Abbas (external author)
  •   O'Brien, Martin

Publication Date


  • 2010

Citation


  • Karunanayake Athukoralalage, I., Valadkhani, A. & O''Brien, M. (2010). The effects of financial crises on international stock market volatility transmission. Economics Joint Scientific Conference (pp. 1-25). Korea: Korea Economic Association.

Ro Full-text Url


  • http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1017&context=buspapers

Ro Metadata Url


  • http://ro.uow.edu.au/buspapers/18

Start Page


  • 1

End Page


  • 25