This chapter presents a regime switching GARCH model (RS-GARCH) to examine the volatile behavior and volatility linkages among the four major segmented Chinese stock indices. We find evidence of a regime shift in the volatility of the four markets, and the RS-GARCH model appears to outperform the single regime GARCH model. The evidence suggests that B-share markets are more volatile and shift more frequently between high- and low-volatility states. B-share markets are found to be more sensitive to international shocks, while A-share markets seem immune to international spillovers of volatility. Also, volatility linkages among the four segmented markets are regime-dependent.
|Title of host publication||Nonlinear Financial Econometrics|
|Subtitle of host publication||Markov Switching Models, Persistence and Nonlinear Cointegration|
|Number of pages||25|
|Publication status||Published - 1 Jan 2010|
Scopus Subject Areas
- Economics, Econometrics and Finance(all)
- Business, Management and Accounting(all)