Abstract
This paper investigates the volatility spillover and time-varying correlation between the tourism firm stock returns and the foreign exchange rate using GARCH-BEKK and DCC-GARCH model for the case of Korea May 2007 to May 2019 period. The main empirical results are as follows. According to the GARCH-BEKK results, the tourism stock returns volatility is greatly affected by their shock and volatility in the preceding period and the impact and volatility of exchange rates. Although shock and volatility spillover exists, a bi-direction between foreign exchange rate and tourism firm, volatility spillover from foreign exchange rate is found to have a greater impact than volatility spillover from tourism firm. DCC-GARCH results show that there is time-varying correlation between the all tourism firm and foreign exchange rate and the degree of correlation is changing over time. However, the mean value of time-varying correlation between each firm and the foreign exchange rate is weakly negative. The finding provides a piece of useful information and important implications to investors, tourism managers, and policymakers.
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