Volatility Spillover Effects in the Stock Markets of South Korea, the United States and China

Abstract

Financial integration are the two key words to take note in this paper. We aim to analyze the following: (1) degree of integration and spillover effects among the stock markets of South Korea, the United States, and China, (2) correctly identified channels of interactions in the volatility of the three stock markets, and (3) dynamic volatility responses in the three stock market due to the Global Financial Crisis impact. We employ the tri-variate asymmetric full-BEKK GARCH model using the weekly stock log return data. Our results suggest that there is a tight integration between the stock markets of South Korea and the United States, weak integration between the stock markets of South Korea and China, and poor integration between the stock markets of the United States and China. More detailed analysis is examined throughout the sections in this paper.