Information Content in International Equity Volatility on Yuan's Depreciation
Authors
-
,AU
Amanjot Singh -
,AUHarminder Singh
DOI:
https://doi.org/10.18311/jbt/2019/23685Keywords:
China, Information Contents, Stock Return, Transmission, VolatilityAbstract
We investigate whether depreciation of USD-CNY exchange rate causes direct or indirect effects on conditional variances in the international equity markets, especially of Japanese, ASEAN, Australian, and Indian markets. Employing APARCH and using MSCI indices we find a significant positive impact of Yuan's depreciation on the conditional variances of Japanese, ASEAN and Australian equity markets. When USD-CNY exchange rate depreciates by 0.25 percent or more, volatility in the Chinese equity market causes a significant positive impact on the conditional volatility in the Japanese and Australian equity markets, though with some lag. USD-CNY exchange rate movements strongly influence the ASEAN equity markets across all time frames. The findings may enable investors to manage their portfolios of equity markets under consideration in the presence or absence of USD-CNY movements.
Downloads
Metrics
Downloads
Published
How to Cite
Issue
Section
License
All the articles published in JBT are distributed under a creative commons license. The journal allows the author(s) to hold the copyright of their work (all usages allowed except for commercial purpose).
Accepted 2019-05-13
Published 2019-07-04
References
Bekiros SD. Decoupling and the spillover effects of the US Financial Crisis: Evidence from the BRIC Markets. IRFA. 2014; 33:58–69. https://doi.org/10.1016/j.irfa.2013.07.007
Bhar R, Nikolova B. Analysis of mean and volatility spillovers using BRIC Countries, Regional and World Equity Index Returns. JEI. 2007; 22(2):369–81. https://doi.org/10.11130/jei.2007.22.2.369
Bianconi M, Yoshino JA, Sousa MO. BRIC and the U.S.financial crisis: An empirical investigation of stock and bond markets. Emerg. Mark. Rev. 2013; 14:76–109. https:// doi.org/10.1016/j.ememar.2012.11.002
Bollerslev T. Generalized autoregressive conditional heteroskedasticity.J Econom. 1986; 31:307–27. https://doi.org/10.1016/0304-4076(86)90063-1
Booth GG, So WR, Tse Y. Price discovery in the German equity index derivatives markets. J. Futures Mark.1999; 9(6):619–43. https://doi.org/10.1002/(SICI)10969934(199909)19:6<619::AID-FUT1>3.0.CO;2-M
Branson WH. Macroeconomic determinants of real exchange rate Risk. R. J. Herring, editor. Managing Foreign Exchange Rate Risk. Cambridge: Cambridge University Press; 1983. p. 33–74.
Caporale GM, Sova A, Sova R. Trade flows and trade specialisation: The case of China. China Economic Power. 2015; 34:261–73. https://doi.org/10.1016/j.chieco.2015.03.010
Diamandis PF, Drakos AA. Financial liberalization, exchange rates and stock prices: Exogenous Shocks in Four Latin America Countries. J Policy model. 2011; 33:381–94. https://doi.org/10.1016/j.jpolmod.2010.11.004
Ding Z, Granger CWJ, Engle RF. A long memory property of stock market returns and a new model. J Empir Financ. 1993; 1:83–106. https://doi.org/10.1016/0927-5398(93)90006-D
Dornbusch R, Fischer S. Exchange rates and the current account. Am Econ Rev. 1980; 70:960–71.
Evgenii G, Elena F. Internal and external spillover effects for the BRIC countries: Multivariate GARCH-in-mean approach. Research in International Business and Finance. 2014; 31:32–45. https://doi.org/10.1016/j.ribaf.2013.11.002
Fowowe B. The relationship between stock prices and exchange rates in South Africa and Nigeria: structural breaks analysis. International Review of Applied Economics. 2015; 29(1):1–14. https://doi.org/10.1080/02692171.2014.933786
Frankel JA. Monetary and portfolio balance models of exchange rate determination. J. S. Bhandari, B. H. Putnam, editors. Economic Interdependence and Flexible Exchange Rates Cambridge: MIT Press; 1983. p. 84–115.
Gagnon l, Karolyi AG. Price and volatility transmisison across borders. Financial Markets, Institutions and Instruments. 2006; 17(3):107–58. https://doi.org/10.1111/ j.1468-0416.2006.00115.x
Granger CWJ, Huang B-N, Yang C.W. A bivariate causality between stock prices and exchange rates: Evidence from Recent Asian Flu. The Quarterly Review of Economics and Finance. 2000; 40:337–54. https://doi.org/10.1016/S10629769(00)00042-9
Kenourgios D, Papadamou S, Dimitriou D. Intraday exchange rate volatility transmissions across QE announcements.FRL. 2015; 14:128–34. https://doi.org/10.1016/j.frl.2015.05.007
Lehkonen H, Heimonen K. Timescale-dependent stock market comovement: BRICs vs. developed markets. J Empir Financ 2014; 28:90–103. https://doi.org/10.1016/j.jempfin.2014.06.002
Lin CH. The comovement between exchange rates and stock prices in the Asian Emerging Markets. International Review of Economics and Finance. 2012; 22:161–72. https://doi.org/10.1016/j.iref.2011.09.006
Phylaktis K, Ravazzolo F. Stock prices and exchange rate dynamics. J. Int. Money Finance. 2005; 24:1031–53. https:// doi.org/10.1016/j.jimonfin.2005.08.001
Rittler D. Price discovery and volatility spillovers in the European Union emissions trading scheme: A highfrequency analysis. JBF. 2012; 36(3):774–85. https://doi.org/10.1016/j.jbankfin.2011.09.009
Singh A, Kaur P. A short note on information transmissions across US-BRIC Equity Markets: Evidence from Volatility Spillover Index. Quant. Econ. J. 2017; 15(1):197–208.https://doi.org/10.1007/s40953-016-0047-2
Singh A, Singh M. Cross country co-movement in equity markets after the US financial crisis: India and major economic giants. Journal of Indian Business Research. 2016; 8(2):98–121. https://doi.org/10.1108/JIBR-08-2015-0089
Syriopoulos T, Makram B, Boubaker A. Stock market volatility spillovers and portfolio hedging: BRICS and the financial crisis. IRFA. 2015; 39:7–18. https://doi.org/10.1016/j.irfa.2015.01.015
