The authors explore the influence of the global financial crisis on the volatility spillover between the Mainland China and Hong Kong stock markets. The data collection period is from January 04, 2002 to December 31, 2013, broken into two sub-periods: pre-crisis (January 04, 2002 to June 30, 2007) and crisis (July 01, 2007 to December 31, 2013). The authors apply asymmetric BEKK-GARCH and adopt the VAR approach as a robustness test. The results indicate that while there is no volatility spillover in the pre-crisis period, strong bi-directional volatility spillover exists in the crisis period. Meanwhile, one month 1 minute high frequency data is applied to explore intraday volatility spillover. The researchers draw three interesting conclusions: The global financial crisis enhanced the economic linkage between the Mainland China and Hong Kong stock markets; and while it did not directly influence the Mainland China market, global financial risk flowed into this region through the Hong Kong market; there exists a bi-directional daily aggregated volatility spillover, but from a microscopic view, a random volatility spillover process is concluded.
|Journal||Investment Management and Financial Innovations|
|Publication status||Published - 2015|
- global financial crisis
- volatility spillover
- asymmetric BEKK-GARCH
- VAR approach
- Mainland China and Hong Kong stock markets