Role of global financial crisis in causing dynamic connectedness of Asian equity markets

Ariff, Azwar and Masih, Mansur (2017): Role of global financial crisis in causing dynamic connectedness of Asian equity markets.

Abstract

Dynamic connectedness of equity markets especially when shock happened has been a concern for policymakers and market participants. In this paper, we examine the connectedness of Asian equity markets within the region when the US subprime crisis or better-known as the global financial crisis occurred in 2008.This paper wants to know whether there has been a shift in terms of net shock givers and receivers over the time? Subsequently, how has connectedness in equity markets changed over time? Finally, do markets become more connected during crisis period? We employ daily data of US, Japan, South Korea, China, Singapore, Malaysia, Indonesia and Thailand. We find that Singapore, US, Malaysia and South Korea played significant roles in bringing about dynamic connectedness of Asian equity markets. In terms of the global financial crisis, emerging market economies such as Singapore, Malaysia and South Korea seem to be vulnerable to the shock and may have contributed as spillover effect of shock to other Asian equity markets. Whereas economies such as China and Japan became a net receiver of shock.

• Item Type: MPRA Paper
• Language: English
• Keywords: Dynamic connectedness, Global Financial Crisis, Asian equity markets
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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