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Volatility Dynamics in the ASEAN– China Free Trade Agreement

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  • John Francis T. Diaz

Abstract

This study used three multivariate general autoregressive conditional heteroskedasticity models to analyze the volatility dynamics in the ASEAN–China Free Trade Agreement. Results indicated the presence of long-run persistence, wherein shocks in China’s stock market affect other ASEAN stock indices in the long term. Further tests revealed the presence of time-varying correlations, suggesting dynamic models, such as the dynamic conditional correlations model, are appropriate. The Baba, Engle, Kraft, and Kroner model determined that the conditional covariances of the Chinese and ASEAN indices are functions of their lagged covariances, further proving that China’s stock volatilities impact the volatilities of ASEAN counterparts. JEL Classification: C58, G15

Suggested Citation

  • John Francis T. Diaz, 2018. "Volatility Dynamics in the ASEAN– China Free Trade Agreement," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(3), pages 287-306, December.
    • Handle: RePEc:sae:emffin:v:17:y:2018:i:3:p:287-306
    DOI: 10.1177/0972652718797812
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    More about this item

    Keywords

    ASEAN–China stock returns and volatility; ACFTA bilateral relationship; CCC; DCC and diagonal BEKK models;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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