This paper examines the interplay between stock market returns and their volatility, focusing on the Asian and global financial crises of 1997-98 and 2008-09 for Australia, Singapore, the UK, and the US. We use a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model and weekly data (January 1992-June 2009). Based on the results obtained from the mean return equations, we could not find any significant impact on returns arising from the Asian crisis and more recent global financial crises across these four markets. However, both crises significantly increased the stock return volatilities across all of the four markets. Not surprisingly, it is also found that the US stock market is the most crucial market impacting on the volatilities of smaller economies such as Australia. Our results provide evidence of own and cross ARCH and GARCH effects among all four markets, suggesting the existence of significant volatility and cross volatility spillovers across all four markets. A high degree of time-varying co-volatility among these markets indicates that investors will be highly unlikely to benefit from diversifying their financial portfolio by acquiring stocks within these four countries only. Copyright 2010 The Authors. Australian Economic Papers 2010 Blackwell Publishing Ltd/University of Adelaide and Flinders University .

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This paper provides some insight into the asymmetric effects of stock market volatility transmission using weekly stock market return data (January 1992–June 2010) of four countries, namely, Australia, Singapore, the United Kingdom and the United States within a MGARCH (multivariate generalised autoregressive conditional heteroskedasticity) framework. Our results indicate that negative shocks in each market play a more important role in increasing both volatility and covolatilities than positive shocks. In addition, as expected, we identified that all markets (particularly Australia and Singapore) exhibit significant positive mean and volatility spillovers from the US stock market returns, but not the other way around.

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