Template-type: ReDIF-Paper 1.0
Author-Name: Jinghui Chen
Author-Workplace-Name: Department of Economics Yokohama National University
Author-Name: Masahito Kobayashi
Author-Workplace-Name:
 Department of Economics Yokohama National University
Author-Name: Michael McAleer
Author-Workplace-Name: Department of Quantitative Finance National Tsing Hua University, Taiwan
Title: Testing for a Common Volatility Process and Information Spillovers in Bivariate Financial Time Series Models
Abstract: The paper considers the problem as to whether financial returns have a common volatility process in the framework of 
	stochastic volatility models that were suggested by Harvey et al. (1994). We propose a stochastic volatility version of the 
	ARCH test proposed by Engle and Susmel (1993), who investigated whether international equity markets have a common volatility 
	process. The paper also checks the hypothesis of frictionless cross-market hedging, which implies perfectly correlated 
	volatility changes, as suggested by Fleming et al. (1998). The paper uses the technique of Chesher (1984) in differentiating an 
	integral that contains a degenerate density function in deriving the Lagrange Multiplier test statistic.
Classification-JEL: C12, C58, G01, G11
Keywords: Volatility comovement, Cross-market hedging, Spillovers, Contagion.
Length: 36 pages 
Creation-Date: 2016-03
Number: 2016-04
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1604.txt
File-URL: https://eprints.ucm.es/id/eprint/36253/1/1604.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1604