Abstract
Using frequency domain analysis, this paper examines the volatility spillover from the United States and Japanese stock markets to the Vietnamese stock market. Daily data of S&P 500, Nikkei 225 and VN-Index from January 01, 2012 to May 31, 2016 is used. In terms of estimation, the GARCH model is used to estimate volatilities in these stock markets; the Granger Causality Test is used to examine volatility spillover; and the test for causality in the frequency domain by Jorg Breitung and Bertrand Candelon (2006) is used to examine the volatility spillover at different frequencies. The empirical results provide two main contributions: (i) there is a significant volatility spillover from the United States to the Vietnamese stock markets, but the evidence of volatility spillover from the Japanese to the Vietnamese stock market is not found; and (ii) the volatility spillover may vary across frequency spectrum bands. To our best understanding, volatility spillover analysis using frequency domain approach was not previously reported in literature.
Highlights
The volatilities of the United States, Japanese and Vietnamese stock market indices can be estimated through generalized ARCH (GARCH) model and the volatility spillover can be tested by Granger Causality Test (Granger 1969). 2.3
The GARCH model proposed by Bollerslev (1986) is used to estimate volatility; Granger Causality Test (Granger 1969) is applied to test for the presence of volatility spillover between markets; and Spectral Granger Causality Test by Breitung & Candelon (2006) is used to test causality at specific frequencies
The results show that there is a significant volatility spillover from the United States to the Vietnamese stock market, but there is no evidence of a volatility spillover from the Japanese to the Vietnamese stock market
Summary
Summary: Using frequency domain analysis, this paper examines the volatility spillover from the United States and Japanese stock markets to the Vietnamese stock market. Aside from examining the volatility spillover from the United States and Japanese stock markets to the Vietnamese stock market (in time domain), this paper extends these test results by using the spectral analysis approach that helps short-term and long-term investors gather more precise information for their investment decisions. Because the volatility spillover test from the United States and Japanese to the Vietnamese stock market was not found in previous studies, it is significant to examine this subject in this paper. This paper aims to test the volatility spillover from the United States and Japanese to Vietnamese stocks market, using a causality method in frequency domain proposed by Breitung & Candelon (2006). The results will help short-term and longterm investors or policy makers have more information in their decision making
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