Proceedings of 10th Asian Business Research Conference
6 - 7 October 2014, Novotel Bangkok on Siam Square, Bangkok, Thailand, ISBN: 978-1-922069-62-7
Information Transmissions among US, China and Hong Kong
Stock Markets
Iris W.H. Yip1, Andy W.W. Cheng2 and Raymond W. So 2
In this paper, we conduct an investigation of the dynamic relationships among the US, China and
Hong Kong stock mark ets. Information transmission of return and volatility spillovers among the
three mark ets are examined using daily stock mark et data covering period from January 1992 to
June 2014. We employ a Dynamic Conditional Correlation Multivariate Generalized
Autoregressive Conditional Heterosk edasticity (DCC-MGARCH) model as our econometric
specification. From the empirical results, we find the evidence of the existence of transmission
and spillover effects among three mark ets. Over the whole sample period, it is found that the US
mark et had dominant volatility impacts on the other two mark ets. We further detect time variation
and structural break s in volatility spillovers and find that the volat ility of the China mark et has a
greater impact on Hong Kong mark et since the financial crisis in 2007. The volatility interactions
between the China and Hong Kong mark ets was more prominent than those between the US and
China, and between the US and Hong Kong. Our findings suggest that while implementing asset
allocation and hedging strategies on the Greater China mark et, especially on Hong Kong, require
the information concerning China volatility behaviour while paying attention to the US mark et. The
results provide important implications for international portfolio diversification.
JEL Classification: C53, G15
Keywords: Information Transmission, Spillovers, Mgarch, Dynamic Conditional Correlation
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1
Department of Mathematics and Statistics, Hang Seng Management College, Hong Kong SAR, P.R. China,
tel: + (852) 39635456, fax: + (852) 39635339, email: irisyip@hsmc.edu.hk,
2
Department of Economics and Finance, Hang Seng Management College, Hong Kong.