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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27882
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| Title: | A MEM-based Analysis of Volatility Spillovers in East Asian Financial Markets |
| Authors: | Engle, Robert
Gallo, Giampiero
Velucchi, Margherita |
| Issue Date: | 9-Feb-2009 |
| Series/Report no.: | FIN-08-036 |
| Abstract: | Transmission mechanisms in financial markets reflect the degree of
integration of capital markets, as well as the relative importance of
real economies. Market volatility has components which may behave
differently across quiet and turbulent periods, but appear to behave in
similar ways from market to market. In this paper we suggest a
Multiplicative Error Model (MEM) approach to study volatility spillovers
among a set of markets, using as a proxy, the market daily range. We
model the dynamics of the expected volatility of one market including
interactions with the past daily ranges of other markets, building a
fully interdependent model. We analyze eight East Asian markets in the
period 1995-2006, devoting particular attention to the treatment of the
1997-1998 turbulent period. We find no evidence of independent markets
while several interdependence relationships can be stressed. Hong Kong
turns out to be the most important market while Taiwan seems to have
suffered quite limited effects from the crisis. Impulse response
functions and multiperiod forecast profiles are developed and suggest a
build-up in the spillover effects. |
| URI: | http://hdl.handle.net/2451/27882 |
| Appears in Collections: | Finance Working Papers
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