Asymmetric volatility transmission across Northeast Asian stock markets

Abstract

This paper investigates various aspects of asymmetric connectedness among the stock markets in China, Japan, and Korea. Based on the realized semi-volatility indices, we find that the impact of bad volatility strictly dominates good volatility in generating transmission across the Northeast Asian markets. We also present evidence that the impacts of the U.S. volatility shock on other countries have been due primarily to bad volatility. In the dynamic analysis, we observe highly volatile patterns in the connectedness measures with several peaks during major economic shocks. Most influential episodes of volatility connectedness have been witnessed, inter alia, during the global financial crisis and the European debt crisis. The recent COVID-19 pandemic has also caused turmoil by damaging the health of the global financial market.

Keywords

• C32
• G15