Volatility Spillover between Stock and Bond Returns: Evidence from ASEAN-5 Countries

Abstract

This study investigated the volatility spillover between stock and government bond returns in ASEAN-5 countries, namely Indonesia, Malaysia, Philippine, Singapore, and Thailand using stock and government bond daily return data between 3 January 2006 and 28 February 2020. Estimation using BEKK-GARCH (1,1,1) found that volatility spillover in ASEAN-5 countries are varied. There is no spillover volatility indication in Singapore and Malaysia. Meanwhile, unidirectional volatility spillover from the stock market to the government bond market was founded in Philippine and Thailand. Bi-directional volatility spillover, from the stock market to the bond market and from the bond market to the stock market occurred in Indonesia. The various result of ASEAN-5 countries presumably caused by the different levels of financial and institutional depth among the countries. Countries with deep financial markets could absorb the shocks that occur so that it not spilled and affecting other markets.