Modelling volatility spillovers from the US equity market to ASEAN stock markets

An important aspect of increased international financial integration is the associated increase in volatility spillover. Analyzing volatility spillovers from advanced economies to emerging economies is clearly important for portfolio investment and risk management. This paper investigates volatility...

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Bibliographic Details
Published in:Pacific-Basin finance journal 2020-02, Vol.59, p.101246, Article 101246
Main Authors: Vo, Xuan Vinh, Tran, Thi Tuan Anh
Format: Article
Language:English
Subjects:
ASEAN
EGARCH
ICSS
Volatility Spillovers
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Summary:An important aspect of increased international financial integration is the associated increase in volatility spillover. Analyzing volatility spillovers from advanced economies to emerging economies is clearly important for portfolio investment and risk management. This paper investigates volatility spillovers from the US equity market to stock markets of ASEAN economies. We use the augmented EGARCH model with the ICSS algorithm to control for the excessive volatility break over an extended period. We document a significant volatility spillover from the US to ASEAN equity markets and this finding is vital to investors. The paper has strong practical importance because an accurate prediction of volatility spillovers in international equity markets is crucial for mitigating portfolio risk. •We investigate volatility spillovers from the US equity market to stock markets of ASEAN economies•We use the augmented EGARCH model with the ICSS algorithm to control for the excessive volatility break•We document a significant volatility spillover from the US to ASEAN equity markets
ISSN:0927-538X
1879-0585
DOI:10.1016/j.pacfin.2019.101246