Associated Analysis of South-Korea And Japan Stock Market Returns Volatility: An Application of Bivariate Student’s t Distribution And GARCH Model

ASIAIR > Asia University Journals > Asian Journal of Management and Humanity Sciences > v.3 n.1-4 > Item 310904400/2134

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Title:	Associated Analysis of South-Korea And Japan Stock Market Returns Volatility: An Application of Bivariate Student’s t Distribution And GARCH Model
Authors:	WANN-JYI HORNG
Contributors:	Department of Hospital and Health Care Administration, Chia Nan University of Pharmacy & Science
Keywords:	stock market returns;Tokyo NK-225 index;South-Korea stock index;bivariate GARCH model;Student’s t distribution;asymmetric test
Date:	2008
Issue Date:	2009-10-13 08:48:16 (UTC+0)
Publisher:	Asia University
Abstract:	This paper uses South Korean and Japanese stock prices from January 4, 1999 to December 29, 2005, to construct a model of the associations between the South Korean and Japanese stock markets. Student's t distribution is used to analyze the proposed model. The empirical results show that there are mutual effects between the South Korean and the Japanese stock markets which may be described using a bivariate GARCH (1, 2) model. The empirical results also show that there is a positive relationship between South Korean and Japanese stock market returns - namely in the mutual synchronized influence of the markets’ return volatility. The correlation coefficient of the two stock market returns is 0.5227. Also, during the research data period, South Korea's stock market did display an asymmetrical effect, but Japan's stock market lacked this effect. The evidence may suggest that stock market investors or international fund managers may want to consider Japan’s stock price return volatility risk and its implications before investing in South Korea. Therefore, during stable stock market times, the influence of the foreign country’s stock market return volatility behavior should not be neglected; otherwise, the anticipated effect will not be acheived.
Relation:	Asian Journal of Management and Humanity Sciences 3(1-4):46-58
Appears in Collections:	[Asian Journal of Management and Humanity Sciences] v.3 n.1-4

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