Extreme downside risk spillover from the United States and Japan to Asia-Pacific stock markets
(2014) In International Review of Financial Analysis 33. p.39-48- Abstract
- This paper proposes a binary response model approach to measure and forecast extreme downside risks in Asia-Pacific markets given information on extreme downside risks in the U.S. and Japanese markets. The extreme downside risk of a market is measured as the occurrence of extreme downside movement—market returns falling below left-tail Value at Risk in a Markov switching framework. The empirical findings are consistent with the following notions. First, extreme downside movements of the S&P 500 and Nikkei 225 are significantly predictive for the likelihood of extreme downside movements in all the investigated Asia-Pacific markets. Second, the majority of Asia-Pacific markets become more sensitive to Japan's extreme downside risk when... (More)
- This paper proposes a binary response model approach to measure and forecast extreme downside risks in Asia-Pacific markets given information on extreme downside risks in the U.S. and Japanese markets. The extreme downside risk of a market is measured as the occurrence of extreme downside movement—market returns falling below left-tail Value at Risk in a Markov switching framework. The empirical findings are consistent with the following notions. First, extreme downside movements of the S&P 500 and Nikkei 225 are significantly predictive for the likelihood of extreme downside movements in all the investigated Asia-Pacific markets. Second, the majority of Asia-Pacific markets become more sensitive to Japan's extreme downside risk when the Japanese market switches into high volatility periods, whereas the U.S. spillover effect is intensified only on Taiwan during high volatility periods in the U.S. Third, mainland China is the least sensitive to extreme downside risk in the U.S. and Japan, Australia is the most sensitive to the U.S., and Singapore is the most sensitive to Japan. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/3955431
- author
- Liu, Lu LU
- organization
- publishing date
- 2014
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Extreme downside risk, Risk spillover, Value at Risk, Granger causality in risk, Markov switching, Extreme value regression
- in
- International Review of Financial Analysis
- volume
- 33
- pages
- 39 - 48
- publisher
- North-Holland
- external identifiers
-
- wos:000338818500006
- scopus:84902085149
- ISSN
- 1057-5219
- DOI
- 10.1016/j.irfa.2013.07.009
- language
- English
- LU publication?
- yes
- id
- 8afa9d25-384e-4625-8b1d-6721a7e34d5c (old id 3955431)
- date added to LUP
- 2016-04-01 10:32:17
- date last changed
- 2022-04-04 19:04:00
@article{8afa9d25-384e-4625-8b1d-6721a7e34d5c,
abstract = {{This paper proposes a binary response model approach to measure and forecast extreme downside risks in Asia-Pacific markets given information on extreme downside risks in the U.S. and Japanese markets. The extreme downside risk of a market is measured as the occurrence of extreme downside movement—market returns falling below left-tail Value at Risk in a Markov switching framework. The empirical findings are consistent with the following notions. First, extreme downside movements of the S&P 500 and Nikkei 225 are significantly predictive for the likelihood of extreme downside movements in all the investigated Asia-Pacific markets. Second, the majority of Asia-Pacific markets become more sensitive to Japan's extreme downside risk when the Japanese market switches into high volatility periods, whereas the U.S. spillover effect is intensified only on Taiwan during high volatility periods in the U.S. Third, mainland China is the least sensitive to extreme downside risk in the U.S. and Japan, Australia is the most sensitive to the U.S., and Singapore is the most sensitive to Japan.}},
author = {{Liu, Lu}},
issn = {{1057-5219}},
keywords = {{Extreme downside risk; Risk spillover; Value at Risk; Granger causality in risk; Markov switching; Extreme value regression}},
language = {{eng}},
pages = {{39--48}},
publisher = {{North-Holland}},
series = {{International Review of Financial Analysis}},
title = {{Extreme downside risk spillover from the United States and Japan to Asia-Pacific stock markets}},
url = {{http://dx.doi.org/10.1016/j.irfa.2013.07.009}},
doi = {{10.1016/j.irfa.2013.07.009}},
volume = {{33}},
year = {{2014}},
}