Is small beautiful? Size effects of volatility spillovers for firm performance and exchange rates in tourism

Abstract

This paper examines the size effects of volatility spillovers for firm performance and exchange rates with asymmetry in the Taiwan tourism industry. The analysis is based on two conditional multivariate models, BEKK-AGARCH and VARMA-AGARCH, in the volatility specification. Daily data from 1 July 2008 to 29 June 2012 for 999 firms are used, which covers the Global Financial Crisis. The empirical findings indicate that there are size effects on volatility spillovers from the exchange rate to firm performance. Specifically, the risk for firm size has different effects from the three leading tourism sources to Taiwan, namely USA, Japan, and China. Furthermore, all the return series reveal quite high volatility spillovers (at over sixty percent) with a one-period lag. The empirical results show a negative correlation between exchange rate returns and stock returns. However, the asymmetric effect of the shock is ambiguous, owing to conflicts in the significance and signs of the asymmetry effect in the two estimated multivariate GARCH models. The empirical findings provide financial managers with a better understanding of how firm size is related to financial performance, risk and portfolio management strategies that can be used in practice.

Tourism development and happiness: International evidence

“…Tourism is one of the fastest developing industries in the world and correlates closely with economic growth and socioeconomic improvement for many developing nations as well as for some developed nations (Shahzad et al, 2017). The travel and leisure industry, as a leader of economic growth, can inspire GDP growth through jobs and enterprise formation and offer substantial foreign exchange revenues (Chang et al, 2013). Chiu and Yeh (2017) find robust evidence of a nonlinear link between tourism growth and economic growth, signifying that it is not unceasing and constant.…”

The sensitivity of winter tourism to exchange rate changes: Evidence for the Swiss Alps

“…Exchange rate movements are generally considered an important determinant of tourism demand. In particular, it is well known that exchange rate fluctuations dominate the overall price movements of relative tourism prices over time (Chang et al, 2013;Schiff and Becken, 2011). The discussion on the impact of the Swiss franc appreciation and economic stagnation of the main visitor countries on Swiss tourism is not new.…”

Inter-regional spillover effects in New Zealand international tourism demand

“…Balli et al approach falls along the same line with Chan et al (2005) who use three multivariate GARCH models to investigate the effect of positive and negative shocks on conditional volatility in tourist arrivals to Australia. Other users of this methodology include Shareef and McAleer (2005, 2007, Hoti et al (2007) and Chang, Hsu, and McAleer (2013). The novelty of our paper resides in the use of inter-regional tourism data within a country, New Zealand, to document spillovers as opposed to the usual cross-country or cross regions of different countries found in the existing literature.…”