FEEM working papers "Note di lavoro" series
2003 .043

STAR-GARCH Models for Stock Market Interactions in the Pacific Basin Region, Japan and US


Authors: Matteo Manera, Giorgio Busetti
Series: Economy and Society
Editor: Fausto Panunzi
Type: Book
Keywords: STAR-GARCH models,stock market integration,Pacific-Basin capital markets,outliers
JEL n.: C22,C51,C52,F36
JEL: International Finance and Monetary Policy
Published in: Nova Science Publishers
Date: 2006

Abstract

We investigate the financial interactions between countries in the Pacific Basin region (Korea, Singapore, Malaysia, Hong Kong and Taiwan), Japan and US. The originality of the paper is the use of STAR-GARCH models, instead of standard correlation-cointegration techniques. For each country in the Pacific Basin region, we find statistically adequate STAR-GARCH models for the series of stock market daily returns, using Nikkei225 and S&P500 as alternative threshold variables. We provide evidence for the leading role of Japan in the period 1988-1990 (pre-Japanese crisis years), whereas our results suggest that the Pacific Basin region countries are more closely linked with the US during the period 1995-1999 (post- Japanese crisis years).

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