International Transmission of Swap Market Movements: The U.S., Korea, and China*

Lee, Hahn Shik; Hong, Woo-Hyung

doi:10.1111/j.2041-6156.2009.tb00028.x

Cited by 6 publications

(5 citation statements)

References 26 publications

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“…The data are initially obtained for daily swap rates, Treasury bond rates, and stock index prices for the G7 countries[3]. While previous studies use daily data to investigate spillovers for swap markets (In, 2007; Lee and Hong, 2009), serious issues are raised by the differential time-zone effects, with trading hours for markets in North America and Europe overlapping only partially (Kumar and Okimoto, 2011)[4]. Accordingly, following Kumar and Okimoto (2011), the daily data on yields and stock prices are averaged into weekly data, and the analyses are undertaken using these weekly averages[5].…”

Section: Data and Empirical Resultsmentioning

confidence: 99%

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Spillovers of international interest rate swap markets and stock market volatility

Lee

Hsu

Chien

2016

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Purpose The purpose of this paper is to investigate volatility spillovers across the interest rate swap markets of the G7 economies, and then the authors investigate whether spillovers of swap markets contain useful information to explain subsequent stock price movements. Design/methodology/approach This study uses the short- and long-term swap spread volatility of the G7 countries to explore the spillover effects of international swap markets, and then investigates the relationship between swap and stock markets. The authors use the generalized VAR approach suggested by Diebold and Yilmaz (2012) to study spillovers of international swap markets. The Granger-causality tests are employed to examine the linkage of interest rate swap and stock markets. Findings This paper shows that a moderate spillover effect exists for the short- and long-term swap markets. Moreover, the results show that the short- and long-term swap markets of France and Germany have a larger impact on other countries’ swap markets than that of other countries’ swap markets on the French and German swap markets. Finally, the results indicate that the total volatility spillovers for the long-term swap markets have a larger influence on the total volatility spillover index of stock markets and the global stock market volatility than that of the short-term swap markets. Originality/value Prior literature has used impulse response and variance decomposition analyses to investigate international swap markets linkages. However, the results depend on the ordering of variables. This study uses the framework of Diebold and Yilmaz (2012) to overcome the ordering issue, and thus the authors can compute directional spillovers. This paper is the first study to explore the linkage of the total volatility spillover of swap markets and the stock markets.

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Section: Data and Empirical Resultsmentioning

confidence: 99%

“…1. Other relevant research includes In et al (2004), In (2007), and Lee and Hong (2009), among others.…”

Section: Notesmentioning

confidence: 99%

Spillovers of international interest rate swap markets and stock market volatility

Lee

Hsu

Chien

2016

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“…A similar study on information transmission involving the United States, Chinese, and Korean swap markets shows strong evidence of swap spread and volatility spillover effects from the United States market to its Korean counterpart. On the other hand, the evidence of spillover effects between the United States and Chinese swap markets is weak (Lee and Hong, 2009). The coefficients of MA (1) term in the conditional mean equations are statistically significant, implying some sort of market frictions or infrequent trading.…”

Section: Resultsmentioning

confidence: 99%

The Effect of Abnormal Turnover on Asymmetric Autoregressive Behavior of Index Returns: Evidence from the Chinese A‐share Stock Markets*

Hsiao

2012

Asia-Pac J of Fin Stud

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This study tests the effect of turnover shocks on the asymmetric autoregressive behavior of index returns. The methodological approach adopted in this study is based on the relationship between market return and trading volume. This study first uses a vector autoregression (VAR) to model two market trading volume series by controlling for the variation associated with the sign and magnitude of both week t and week t − 1 or week t + 1 market returns. The generated market‐adjusted relative turnover (MRTO) series are then plugged into the bivariate asymmetric AR GARCH‐t model (asAR‐GARCH‐t) using weekly data from the Shanghai and Shenzhen A‐share stock markets. The results show that turnover shocks have a material effect on asymmetric autoregressive behavior and thus on asymmetric persistence of past returns.

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“…This approach reveals that while the US swap market had a major influence on those of Japan and the UK, the latter two exerted no such sway on the former and that reciprocal spillovers existed between the Japanese and the UK swap markets. Similarly, Lee and Hong (2009) analyse whether and to what extent the Korean and Chinese swap markets were linked to their US counterpart, using bivariate EGARCH models. They find that the US swap market exerted major influence on the Korean and the Chinese swap markets, which showed reciprocal force, and that the linkage between the US and Chinese swap markets was weak.…”

Section: Introductionmentioning

confidence: 99%

Volatility transmission of swap spreads among the US, Japan and the UK: a cross-correlation function approach

Toyoshima

Hamori

2012

Applied Financial Economics

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This article analyses volatility transmission across the swap markets of the US, Japan and the UK. The two-step procedure developed by Cheung and Ng (1996) is used to examine causality-in-mean and causality-in-variance among the three countries. The empirical findings indicate the existence of more causality-in-variance patterns during the time of financial crisis than in the normal period that preceded it.

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International Transmission of Swap Market Movements: The U.S., Korea, and China*

Cited by 6 publications

References 26 publications

Spillovers of international interest rate swap markets and stock market volatility

Spillovers of international interest rate swap markets and stock market volatility

The Effect of Abnormal Turnover on Asymmetric Autoregressive Behavior of Index Returns: Evidence from the Chinese A‐share Stock Markets*

Volatility transmission of swap spreads among the US, Japan and the UK: a cross-correlation function approach

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