Asymmetric Volatility Transmission between Stock and Bond Markets in Korea
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Transmission mechanisms of volatility between stock and bond markets have drawn the attention of numerous academics and practitioners as they both play crucial roles in portfolio and risk management. However, there has been no consensus on the evidence of volatility spillover between stock and bond markets in the prior literature. In this context, we re-examined the volatility linkages between stock and bond markets in Korea using a Granger- causality test and an asymmetric bivariate GARCH model. The estimation results of the GARCH-BEKK model suggest that there is unidirectional volatility spillover from the KOSPI market to the KTB market, implying that the stock market tends to exert influence over the bond market and not vice versa. Regarding asymmetric volatility transmission, we found that bad news of volatility in the stock market decreases the volatility of the KTB market.
Abstract
Transmission mechanisms of volatility between stock and bond markets have drawn the attention of numerous academics and practitioners as they both play crucial roles in portfolio and risk management. However, there has been no consensus on the evidence of volatility spillover between stock and bond markets in the prior literature. In this context, we re-examined the volatility linkages between stock and bond markets in Korea using a Granger- causality test and an asymmetric bivariate GARCH model. The estimation results of the GARCH-BEKK model suggest that there is unidirectional volatility spillover from the KOSPI market to the KTB market, implying that the stock market tends to exert influence over the bond market and not vice versa. Regarding asymmetric volatility transmission, we found that bad news of volatility in the stock market decreases the volatility of the KTB market.
참고문헌 (28)
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