Return and Asymmetric Volatility Transmissions Between Main Stock Market and Second-Tier Stock Market: The Case of Hong Kong

Trang Nguyen, Taha Chaiechi, Lynne Eagle, David Low

Research output: Chapter in Book/Report/Conference proceedingConference Paper published in Proceedingspeer-review

Abstract

This study aims to investigate the dynamic return and asymmetric volatility transmissions between the main stock market and the Growth Enterprise Market in Hong Kong. Unlike previous studies, this study examines the cross-market transmissions under the joint impacts of volatility breaks, thin trading, and trading volume. A linear state-space AR model with Kalman filter estimation and an augmented bivariate VAR asymmetric BEKK-GARCH model are employed for empirical analysis. The results determine that under the joint impacts of volatility breaks, thin trading, and trading volume, a unidirectional return transmission from the GEM to the main market survives with the diminishing magnitude and significant level. However, the underlying volatility transmission from the GEM to the main market, in essence, is eliminated. This paper aims to be a proof of concept to provide sufficient evidence of methodological viability, which can then be used in larger-scale research or replicated in new settings.
Original languageEnglish
Title of host publicationEconomics and Finance Readings
Subtitle of host publicationSelected Papers from Asia-Pacific Conference on Economics & Finance, 2019
EditorsEvan Lau, Biagio Simonetti, Irwan Trinugroho, Lee Ming Tan
Place of PublicationSingapore
PublisherSpringer Singapore
Chapter3
Pages29-49
Number of pages21
Edition1
ISBN (Electronic)978-981-15-2906-1
ISBN (Print)978-981-15-2905-4, 978-981-15-2908-5
DOIs
Publication statusPublished - May 2020

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