Transmission of Information Across International Equity Markets

Abstract

This paper provides evidence of transmission of information from the U.S. and Japan to Korean and Thai equity markets during the period from 1995 through 2000. Information is defined as important macroeconomic announcements in the U.S., Japan, Korea, and Thailand. Using high-frequency intraday data, I focus the study on return volatility and trading volume because the implications of new information are much clearer than for returns. I find a large and significant association between emerging-economy equity volatility and trading volume and developed-economy macroeconomic announcements at short-time horizons. This is the first strong evidence of this sort of international information transmission. Previous studies' findings of at most weak evidence may be due to their use of lower frequency data and their focus on developed-economy financial market innovations as the measure of information.

Time-varying Return and Volatility Spillover among EAGLEs Stock Markets: A Multivariate GARCH Analysis

“…They reported that US stock market is the most influential market in the world and the UK in Europe. Similarly, Wongswan (2006) investigates the influence of US and Japan markets information declaration on Korean and Thai stock market volatility. They could detect important feedback relationship between developed markets' information announcement and emerging markets' volatility in the short-run.…”

The spillover effects of target interest rate news from the U.S. Fed and the European Central Bank on the Asia-Pacific stock markets

“…In general, the target news coefficient in the conditional mean equation is expected to be negative as Wongswan (2006Wongswan ( , 2008, Bernanke and Kuttner (2005), Ehrmann and Frantzscher (2006), and Rigobon and Sack (2004) documented for various stock markets. Unexpected interest rate rises from the Fed and the ECB could have similar market depressing influences in the Asia-Pacific (a negative news coefficient) through (i) higher financing costs in general and lower stock prices of cross-listed foreign companies in these markets, and (ii) lower demand for imports from the Asia Pacific.…”

“…Thus far, there are only a handful of studies that examine the direct influence of the Fed's news on the financial markets of other countries. Wongswan (2006Wongswan ( , 2008 provide a mixed evidence on the Fed's interest news spillover effects on the stock market returns in a number of countries. Ehrmann and Fratzscher (2006) report that the U.S.…”

International market links and volatility transmission

“…Engle and Ng (1988), Hamao, Masulis and Ng (1990), Engle, Ito and Lin (1990), King, Sentana and Wadhwani (1994), Lin, Engle and Ito (1994), Karolyi (1995), and Wongswan (2006) employ multivariate GARCH models to show that volatility spillovers indeed occur across international stock markets as well as in foreign exchange markets. In contrast, Cheung and Ng (1996), Hong (2001), Pantelidis and Pittis (2004), Sensier and van Dijk (2004), and van Dijk, Osborne and Sensier (2005) propose simple tests of noncausality in variance based on the cross-correlation between leads and lags of squared GARCH-standardized residuals.…”