This paper employs a factor stochastic volatility (SV) model to investigate the return and volatility interactions among three major Asian stock indices and the NASDAQ index. Factor SV models simplify the implementation a general Multivariate SV model, and have good capability to decompose complicated interactions among financial markets. Our empirical results reveal interesting phenomenons: first, the common volatility component among the four indices is highly persistent, and it behaves like a long memory random walk. All of the idiosyncratic components have a smaller persistent level, but are more volatile than the common component. Second, the NASDAQ, NK225, and TWSI indices form a group which reveal strong correlations with each other. The KOSPI index, however, displays weaker correlations with the other three indices.
|Number of pages||9|
|Journal||International Research Journal of Finance and Economics|
|Publication status||Published - 2009 May 1|
All Science Journal Classification (ASJC) codes
- Economics and Econometrics