Volatility transmissions between stock and bond markets : evidence from Japan and the U.S.

Fang, Victor, Lim, Yee-Choon and Lin, Chien-Ting 2006, Volatility transmissions between stock and bond markets : evidence from Japan and the U.S., International journal of information technology, vol. 12, no. 6, pp. 120-128.

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Title Volatility transmissions between stock and bond markets : evidence from Japan and the U.S.
Author(s) Fang, Victor
Lim, Yee-Choon
Lin, Chien-Ting
Journal name International journal of information technology
Volume number 12
Issue number 6
Start page 120
End page 128
Publisher World Scientific Publishing Co. Pte. Ltd.
Place of publication Singapore, Singapore
Publication date 2006
ISSN 0218-7957
Keyword(s) comovement
volatility transmissions
idiosyncratic conditional varaince
GARCH(1,1)
Summary This study attempts to investigate the transmission of market-wide volatility between the equity markets and bond markets of Japan and the U.S. To measure the volatility transmission, the BEKK (Baba, Engle, Kraft and Kroner, 1990) method, a decomposition approach of the multivariate GARCH (1,1) model, is used to examine the cross-market contemporaneous effect of information arrival. The time series analysis provides evidence to the long-run phenomena of causality in conditional variances of paired assets within the local and international markets. Within various pairings, some evidence of bi-directional volatility transmissions such as informational linkages have been observed. Our empirical results suggest that within the domestic cross markets, the volatility transmission is unidirectional from the stock market to the bond market. Evidence from international cross-market analysis is mixed, with strong evidence on volatility spillover among these international stock markets, but weak evidence between international stock and bond markets. In addition, there are significant directional volatility transmissions between DJI index and FTSE100 index, and between DJI index and DAX200 index. The volatility transmission between these two markets indicates that the international diversification of bonds is not prevalent.
Language eng
Field of Research 159999 - Commerce, Management, Tourism and Services not elsewhere classified
Socio Economic Objective 970115 - Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Persistent URL http://hdl.handle.net/10536/DRO/DU:30042545

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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