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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