VOLATILITY SPILLOVER IN STOCK MARKET, FOREIGN EXCHANGE, AND BOND MARKET IN ASIA
Kusuma Ratnawati
Management, Faculty of Economics and Business Universitas Brawijaya, Malang
kusuma[at]ub.ac.id
Abstract
This research is aimed to analyse volatility spillover in stock market, foreign exchange, and bond market in ten developing countries in Asia, consisting of Indonesia, Singapore, Taiwan, Malaysia, Philippines, China, South Korea, Hong Kong, Thailand, and India within the period of January 1, 2009 – December 31, 2016. The analysis method for the data required in this research employed Trivariate GARCH Model and The Cholesky Decomposition, assisted by software E-views8. The variables in this research comprised stock market (X1), foreign exchange (X2), and bond market (X3). The stock market was set as a proxy for daily closing share price index in each country, the foreign exchange served as a proxy for daily closing exchange rate in each country against USD, and the bond market-s proxy of ten-year daily government bond price in each country was for previous closing price. The result showed that there was volatility spillover in financial markets across the ten countries in Asia for stock market, foreign exchange, and bond market. It indicates that the trends in foreign exchange rate, share and bond prices in each country are influential to the trends in foreign exchange rate, share and bond prices in other countries.
Keywords: volatility spillover, stock market, foreign exchange, bond market
Topic: Finance