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http://dx.doi.org/10.29214/damis.2019.38.1.011

Estimation of Volatility among the Stock Markets in ASIA using MRS-GARCH model  

Lee, Kyung-Hee (Dept. of Tourism Administration, Kangwon National University)
Kim, Kyung-Soo (Dept. of Accounting, Kangwon National University)
Publication Information
Management & Information Systems Review / v.38, no.1, 2019 , pp. 181-199 More about this Journal
Abstract
The purpose of this study is to examine whether or not the volatility of the 1997~1998 Asian crisis still affects the monthly stock returns of Korea, Japan, Singapore, Hong Kong and China from 1980 to 2018. This study investigated whether the volatility has already fallen to pre-crisis levels. To illustrate the possible structural changes in the unconditioned variance due to the Asian financial crisis, we use the MRS-GARCH model, which is a regime switching model. The main results of this study were as follows: First, the stock return of each country was weak in the high volatility regime except Japan resulted by the Asian financial crisis from 1997 to 1998 until March 2018, and the Asian stock market has not yet calmed down except for the global financial crisis period of 2007 and 2008. Second, the conditional volatility has been significantly and persistently decreased and eliminated after the Asian financial crisis. Thus, we could be judged that the Asian stock market was not fully recovered(stable) due to the Asian crisis including the capital liberalization high inflation, worsening current account deficit, overseas low interest rates and expansion of credit growth in 1997 and 1998, but the Asian stock market was largely settled down, except for the 2007 and 2008 in Global financial crises. Considering the similarity between the Asian stock markets and the similar correlation of the regime switching, it may be worthwhile to analyze the MRS-GARCH model.
Keywords
Volatility; Crisis; Structural Changes; MRS-GARCH; Capital Liberalization;
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