A COMPARATIVE STUDY OF THE TAIWAN AND JAPAN EQUITY AND FOREIGN EXCHANGE MARKETS: MODELING, ESTIMATION AND APPLICATION OF THE COMPONENT GARCH-IN-MEAN MODEL
Journal Title: Asian Economic and Financial Review - Year 2016, Vol 6, Issue 5
Abstract
The main purpose of this paper is to verify the effectiveness of the bivariate Component GARCH-in-mean (GARCH-M) model and analyze the interactions and risk premium of equity markets by exploring the short- and long-run volatility components on both the Taiwanese and Japanese equity markets. We show that unexpected shocks of volatility will in general influence the fluctuations of both equity and foreign exchange markets. Persistence on the long-run volatility components of both markets is also found. The results also reveal that the positive risk-return relation on equity markets can be further verified when the impacts of short and long-run volatility components are decomposed by the Component GARCH-M model. The decomposition can also facilitate reflecting the transitory and permanent volatility impacts of foreign exchange exposure on the returns of equity markets.
Authors and Affiliations
Hsiang-Hsi Liu*| Distinguished Professor, Graduate Institute of International Business, National Taipei University, Taipei, Taiwan, Robin K Chou| Professor, Department of Finance, National Chengchi University, Taipei, Taiwan
Keywords
Related Articles
- EP ID EP2276
- DOI -
- Views 485
- Downloads 37
THE RELATIONSHIP BETWEEN GROWTH AND EMPLOYMENT INTENSITY: EVIDENCE FOR DEVELOPING COUNTRIES
The main objective of this paper is to contribute to the literature on employment-GDP elasticities by assessing the determinants of cross-country variations in employment elasticities, focusing particularly on the role o...
The Technical Efficiency of Nigerian Banks
This study provides an insight into the technical efficiency of Nigerian banks. The Data Envelopment Analysis (DEA) approach was employed to derive the efficiency scores of the various banks. A total of 67 banks, made up...
THE TIME-VARYING IMPACT OF REGIONAL TRADE AGREEMENT: EVIDENCE FROM ASEAN
Regional Trade Agreements such as ASEAN Free Trade Area (AFTA) are expected to increase the trade flows among member countries through trade creation and trade diversion. This paper employs the gravity model using manufa...
WHAT IS ABOUT WAGES IN THE CZECH EDUCATION AND HEALTHCARE SECTORS BEFORE, DURING AND AFTER THE GLOBAL ECONOMIC RECESSION?
Wages in the Czech education and healthcare sectors have been a widely debated issue. The present paper deals with the wage development in the above two areas compared to that on the national scale before, during and aft...
DETERMINANTS OF EXPORTS COMPETITIVENESS: AN EMPIRICAL ANALYSIS THROUGH REVEALED COMPARATIVE ADVANTAGE OF EXTERNAL SECTOR OF PAKISTAN
In this paper, we have endeavored to analyze a sector-wise export performance of Pakistan using Revealed Comparative Advantage with the global market. Data for the period 2003-2015, Harmonized System (HS) 1988/92 develop...