DCC Analysis of Two Stock Returns Volatility with Two Factors of MSCI Global and Europe Market Indices: Study of Thailand and Malaysia Stock Markets

Abstract

This paper uses the Thailand and the Malaysia's stock prices of material from January, 2004 to December, 2009, discussing the model construction and their association between Thailand and Malaysia's stock markets, and also uses Student's t distribution to analyze the proposed model. The empirical results show that the mutual effects of the Thailand and the Malaysia's stock markets may construct bivariate IGARCH (1, 1) model with a DCC. The empirical results also show that Thailand and Malaysia's stock market returns present the positive relation. Namely, these two stock market returns' volatility are synchronized influenced, and the average estimation value of the DCC coefficient of two stock market returns amounts to 0.326. Also, Thailand and Malaysia's stock markets do not have the asymmetrical effect in the research data period. The variation risk of the Thailand's and the Malaysia's stock markets does not receive the effect of the MSCI global index and MSCI Europe market index.