Volatility in stock markets and its transmission is considered to be important for practitioners and academics in finance as volatility is synonymous with risk. It is preliminary study for determining the cost of capital, assessing investment, and making finest investment decision. This thesis researches the volatility spillover among Greater China Stock Market which covers Shenzhen and Shanghai, Hong Kong and Taiwan Stock Exchanges by using Vector Autoregressive model, symmetric and asymmetric GARCH models. The results indicate that there is high degree of volatility spillover effects from Hong Kong to other three markets, which documents Hong Kong stock market is the most dominant and influencing one among them. As expected, unconditional correlation in return and conditional covariance between Shanghai and Shenzhen stock markets is the highest. Therefore, the VAR model results reveal that 88% of Shenzhen stock market’s innovations are explained only by Shanghai and Hong Kong stock markets and the result gives the clue for Shenzhen stock market’s significant asymmetric coefficient in the GJR-GARCH model. That implies bad news occurring to Shanghai and Hong Kong stock markets is the most vulnerable to Shenzhen stock market.
