Volatility spillovers from Australia's major trading partners across the GFC

David E. Allen, Michael McAleer, Robert J. Powell, Abhay K. Singh

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This paper features an analysis of volatility spillover effects from Australia's major trading partners, namely, China, Japan, Korea and the United States, for a period running from 1st January 2004 to 30th June 2014. This captures the impact of the Global Financial Crisis (GFC). These markets are represented by the following major indices: The Shanghai composite and the Hangseng. (in the case of China, as both China and Hong Kong appear in Australian trade statistics), the S&P500 index, the Nikkei225 and the Kospi index. We apply the Diebold and Yilmaz (2009) Spillover Index, constructed in a VAR framework, to assess spillovers across these markets in returns and in volatilities. The analysis confirms that the US and Hong Kong markets have the greatest influence on the Australian one. We then move to a GARCH framework to apply further analysis and apply a tri-variate Cholesky-GARCH model to explore the effects from the US and Chinese market, as represented by the Hang Seng Index. We further explore three sample sub-periods, Pre-GFC 2004/1/1/ until 2007/07/08/, GFC 2007/08/09 until 2010/05/07 and Post-GFC 2010/05/10 until 2014/06/20 and analyse the behaviour of time-varying conditional correlations in these sub-periods. The GARCH analysis re-affirms the strong influence of the Hang Seng Index and the S&P500 Index.

LanguageEnglish
Pages159-175
Number of pages17
JournalInternational Review of Economics and Finance
Volume47
DOIs
Publication statusPublished - 1 Jan 2017
Externally publishedYes

Fingerprint

Global financial crisis
Volatility spillover
China
Generalized autoregressive conditional heteroscedasticity
Hong Kong
Spillover
Japan
Chinese market
Spillover effects
Shanghai
Conditional correlation
Trade statistics
Time-varying
Korea
GARCH model

Keywords

  • Cholesky-GARCH
  • VAR analysis
  • variance decomposition
  • Volatility Spillover Index

Cite this

Allen, David E. ; McAleer, Michael ; Powell, Robert J. ; Singh, Abhay K. / Volatility spillovers from Australia's major trading partners across the GFC. In: International Review of Economics and Finance. 2017 ; Vol. 47. pp. 159-175.
@article{91bf86c8c61d4c1aa1c61d7520d965e9,
title = "Volatility spillovers from Australia's major trading partners across the GFC",
abstract = "This paper features an analysis of volatility spillover effects from Australia's major trading partners, namely, China, Japan, Korea and the United States, for a period running from 1st January 2004 to 30th June 2014. This captures the impact of the Global Financial Crisis (GFC). These markets are represented by the following major indices: The Shanghai composite and the Hangseng. (in the case of China, as both China and Hong Kong appear in Australian trade statistics), the S&P500 index, the Nikkei225 and the Kospi index. We apply the Diebold and Yilmaz (2009) Spillover Index, constructed in a VAR framework, to assess spillovers across these markets in returns and in volatilities. The analysis confirms that the US and Hong Kong markets have the greatest influence on the Australian one. We then move to a GARCH framework to apply further analysis and apply a tri-variate Cholesky-GARCH model to explore the effects from the US and Chinese market, as represented by the Hang Seng Index. We further explore three sample sub-periods, Pre-GFC 2004/1/1/ until 2007/07/08/, GFC 2007/08/09 until 2010/05/07 and Post-GFC 2010/05/10 until 2014/06/20 and analyse the behaviour of time-varying conditional correlations in these sub-periods. The GARCH analysis re-affirms the strong influence of the Hang Seng Index and the S&P500 Index.",
keywords = "Cholesky-GARCH, VAR analysis, variance decomposition, Volatility Spillover Index",
author = "Allen, {David E.} and Michael McAleer and Powell, {Robert J.} and Singh, {Abhay K.}",
year = "2017",
month = "1",
day = "1",
doi = "10.1016/j.iref.2016.10.007",
language = "English",
volume = "47",
pages = "159--175",
journal = "International Review of Economics and Finance",
issn = "1059-0560",
publisher = "Elsevier",

}

Volatility spillovers from Australia's major trading partners across the GFC. / Allen, David E.; McAleer, Michael; Powell, Robert J.; Singh, Abhay K.

In: International Review of Economics and Finance, Vol. 47, 01.01.2017, p. 159-175.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Volatility spillovers from Australia's major trading partners across the GFC

AU - Allen, David E.

AU - McAleer, Michael

AU - Powell, Robert J.

AU - Singh, Abhay K.

PY - 2017/1/1

Y1 - 2017/1/1

N2 - This paper features an analysis of volatility spillover effects from Australia's major trading partners, namely, China, Japan, Korea and the United States, for a period running from 1st January 2004 to 30th June 2014. This captures the impact of the Global Financial Crisis (GFC). These markets are represented by the following major indices: The Shanghai composite and the Hangseng. (in the case of China, as both China and Hong Kong appear in Australian trade statistics), the S&P500 index, the Nikkei225 and the Kospi index. We apply the Diebold and Yilmaz (2009) Spillover Index, constructed in a VAR framework, to assess spillovers across these markets in returns and in volatilities. The analysis confirms that the US and Hong Kong markets have the greatest influence on the Australian one. We then move to a GARCH framework to apply further analysis and apply a tri-variate Cholesky-GARCH model to explore the effects from the US and Chinese market, as represented by the Hang Seng Index. We further explore three sample sub-periods, Pre-GFC 2004/1/1/ until 2007/07/08/, GFC 2007/08/09 until 2010/05/07 and Post-GFC 2010/05/10 until 2014/06/20 and analyse the behaviour of time-varying conditional correlations in these sub-periods. The GARCH analysis re-affirms the strong influence of the Hang Seng Index and the S&P500 Index.

AB - This paper features an analysis of volatility spillover effects from Australia's major trading partners, namely, China, Japan, Korea and the United States, for a period running from 1st January 2004 to 30th June 2014. This captures the impact of the Global Financial Crisis (GFC). These markets are represented by the following major indices: The Shanghai composite and the Hangseng. (in the case of China, as both China and Hong Kong appear in Australian trade statistics), the S&P500 index, the Nikkei225 and the Kospi index. We apply the Diebold and Yilmaz (2009) Spillover Index, constructed in a VAR framework, to assess spillovers across these markets in returns and in volatilities. The analysis confirms that the US and Hong Kong markets have the greatest influence on the Australian one. We then move to a GARCH framework to apply further analysis and apply a tri-variate Cholesky-GARCH model to explore the effects from the US and Chinese market, as represented by the Hang Seng Index. We further explore three sample sub-periods, Pre-GFC 2004/1/1/ until 2007/07/08/, GFC 2007/08/09 until 2010/05/07 and Post-GFC 2010/05/10 until 2014/06/20 and analyse the behaviour of time-varying conditional correlations in these sub-periods. The GARCH analysis re-affirms the strong influence of the Hang Seng Index and the S&P500 Index.

KW - Cholesky-GARCH

KW - VAR analysis

KW - variance decomposition

KW - Volatility Spillover Index

UR - http://www.scopus.com/inward/record.url?scp=84994638526&partnerID=8YFLogxK

U2 - 10.1016/j.iref.2016.10.007

DO - 10.1016/j.iref.2016.10.007

M3 - Article

VL - 47

SP - 159

EP - 175

JO - International Review of Economics and Finance

T2 - International Review of Economics and Finance

JF - International Review of Economics and Finance

SN - 1059-0560

ER -