An Impact of the U.S. and the U.K. Return Volatility for the Hong Kong and the Japan's Stock Market Returns: A DCC and Bivariate AGARCH Model

Abstract

The empirical results show that the dynamic conditional correlation (DCC) and the bivariate AGARCH (1, 2) model is appropriate in evaluating the relationship of the Hong Kong and the Japan’s stock markets. The empirical result also indicates that the Hong Kong and the Japan’s stock markets is a positive relation. The average estimation value of correlation coefficient equals to 0.477, which implies that the two stock markets is synchronized influence. Besides, the empirical result also shows that the Hong Kong stock market has an asymmetrical effect and the Japan’s stock market has not the asymmetrical effect. The return volatility of the Hong Kong stock market receives the influence of the positive and negative values of the U.S. and the U.K. return volatility rates, and the return volatility of the Japan’s stock market also receives the influence of the U.S. and the U.K. return volatility rates.