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Long-Run Comovements in East Asian Stock Market Volatility

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  • Gilles Truchis

    (University of Paris Ouest Nanterre la Défense)

  • Benjamin Keddad

    (Paris School of Business)

Abstract

Two integrated stock markets are generally subjected to common shocks revealing that commonalities in fundamentals drive their underlying return processes. In such a case, volatility series should share a long-run component although their transitory components might temporary diverge. In this paper, we investigate stock market integration in East Asia by analyzing the co-persistent nature of their ex-post observed volatility. Using recent fractional cointegration techniques, we find that volatility of several markets converges in the long run to a common equilibrium. Our results reveal that a global integration process drives the most developed markets of the region, while no evidence of co-persistence appears for emerging markets.

Suggested Citation

  • Gilles Truchis & Benjamin Keddad, 2016. "Long-Run Comovements in East Asian Stock Market Volatility," Open Economies Review, Springer, vol. 27(5), pages 969-986, November.
    • Handle: RePEc:kap:openec:v:27:y:2016:i:5:d:10.1007_s11079-016-9401-4
    DOI: 10.1007/s11079-016-9401-4
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    More about this item

    Keywords

    Volatility; Co-persistence; Fractional cointegration; East Asian stock markets; Comovement; Financial integration;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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