earticle

영어

This study analyzes regional shock spillover effects among three far-eastern Asian stock markets in Korea, China, and Japan using the multivariate GARCH-BEKK model to find out the long-term portfolio diversification effects in association of time-varying volatility correlations. Major findings from the estimation results for the impacts among the three stock market returns and their volatilities over the sample period of 4,072 days from January, 1997 to August, 2012 are as follows. Firstly, VIX, the US stock market volatility index as a global risk factor in the mean equation model shows significant negative impacts commonly on all the three stock market returns whereas the currency depreciation in the basis of dollar value as a country-specific risk factor does not show such high significant results. Secondly, Japan's stock market shows significant positive shock spillovers to those of Korea and China in the symmetric model of variance equation, although Korea and China do not show such highly significant strong shock spillovers to Japan. Meanwhile, China is shown to have a significant negative impact on Korea in the volatility transmission process, providing a new possibility for long-term portfolio diversification effect between these two countries. Lastly, the unexpected decrease in the Japanese stock market return in the asymmetric model of variance equation is shown to have the strongest positive impact on their two adjacent countries' market volatilities, supporting the previous estimation result in the symmetric model, whereas bad news shock from Korea to China is found to exist no longer, initiating the shock-smoothing diversification effect between these two countries.