TY - JOUR
T1 - Dynamic transmissions between main stock markets and SME stock markets
T2 - Evidence from tropical economies
AU - Nguyen, Trang
AU - Chaiechi, Taha
AU - Eagle, Lynne
AU - Low, David
PY - 2020/2
Y1 - 2020/2
N2 - This paper investigates the dynamic return and asymmetric volatility transmissions between main stock markets and Small and Medium Enterprise (SME) stock markets in Hong Kong, Singapore, Thailand, and Malaysia under the joint impacts of volatility breaks, thin trading, and trading volume. For the analysis, a linear state-space AR model with Kalman filter and an augmented bivariate VAR asymmetric BEKK-GARCH model were adopted. The results reveal that only Hong Kong showed evidence of return transmission from the SME market to the main market. Controlling for the joint effects of the three factors considerably reduced the magnitude and significance level of this return transmission and, in essence, eliminates the volatility transmission. Moreover, Hong Kong's main market return exhibited a causal relationship and a long-run equilibrium relationship with the country's economic development. Therefore, the SME market arguably can make an indirect contribution to economic development in Hong Kong via its return transmission across the main market. Consequently, any policies that facilitate the development of the SME market in this country would promote long-term economic stimulation indirectly through its transmission mechanism with the main market.
AB - This paper investigates the dynamic return and asymmetric volatility transmissions between main stock markets and Small and Medium Enterprise (SME) stock markets in Hong Kong, Singapore, Thailand, and Malaysia under the joint impacts of volatility breaks, thin trading, and trading volume. For the analysis, a linear state-space AR model with Kalman filter and an augmented bivariate VAR asymmetric BEKK-GARCH model were adopted. The results reveal that only Hong Kong showed evidence of return transmission from the SME market to the main market. Controlling for the joint effects of the three factors considerably reduced the magnitude and significance level of this return transmission and, in essence, eliminates the volatility transmission. Moreover, Hong Kong's main market return exhibited a causal relationship and a long-run equilibrium relationship with the country's economic development. Therefore, the SME market arguably can make an indirect contribution to economic development in Hong Kong via its return transmission across the main market. Consequently, any policies that facilitate the development of the SME market in this country would promote long-term economic stimulation indirectly through its transmission mechanism with the main market.
KW - Augmented bivariate VAR asymmetric BEKK-GARCH
KW - Return and asymmetric volatility transmissions
KW - SME stock market
KW - Thin trading
KW - Trading volume
KW - Volatility break
UR - http://www.scopus.com/inward/record.url?scp=85064946334&partnerID=8YFLogxK
U2 - 10.1016/j.qref.2019.02.004
DO - 10.1016/j.qref.2019.02.004
M3 - Article
AN - SCOPUS:85064946334
SN - 1062-9769
VL - 75
SP - 308
EP - 324
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
ER -