Template-type: ReDIF-Paper 1.0
Author-Name: Jinghui Chen
Author-Workplace-Name: Graduate School of International Social Sciences 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 And Econometric Institute, Erasmus 
	School of Economics Erasmus University Rotterdam And Department of Quantitative Economics Complutense University of Madrid, 
	Spain And Institute of Advanced Sciences Yokohama National University, Japan.
Title: Testing for volatility co-movement in bivariate stochastic volatility models
Abstract: The paper considers the problem of volatility co-movement, namely as to whether two financial returns have perfectly 
	correlated common volatility process, in the framework of multivariate stochastic volatility models and proposes a test which 
	checks the volatility co-movement. The proposed test is a stochastic volatility version of the co-movement test proposed by 
	Engle and Susmel (1993), who investigated whether international equity markets have volatility co-movement using the framework 
	of the ARCH model.
	In empirical analysis we found that volatility co-movement exists among closelylinked stock markets and that volatility 
	co-movement of the exchange rate markets tends to be found when the overall volatility level is low, which is contrasting to 
	the often-cited finding in the financial contagion literature that financial returns have co-movement in the level during the 
	financial crisis.
Classification-JEL: C12, C58, G01, G11.
Keywords: Lagrange multiplier test, Volatility co-movement, Stock markets, Exchange rate Markets, Financial crisis.
Length: 31 pages 
Creation-Date: 2017-02
Number: 2017-10
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1710.txt
File-URL: https://eprints.ucm.es/id/eprint/41441/1/1710.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1710