A DCC Analysis of International Stock Market: The Role of Emerging Asia and Pacific in the Global Market

• Main Authors: Chen, Li-Yu, 陳力瑜
• Other Authors: Chou, Ray Yeu-Tien
• Format: Others
• Language: en_US
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/e5w62x

碩士 === 國立交通大學 === 經營管理研究所 === 102 === As Asian market is gaining power in the global stage, our research paper examines the co-movements of Asian equity markets against other MSCI regional equity markets from 1997/1/1 to 2013/8/28. We apply a DCC-GARCH model to the MSCI regional weekly indices. We confirm that the correlations between Asian markets and other foreign markets begin to rise after the 1997 Asian financial crisis. We also find out the correlations between emerging Asia and other regions apart from the U.S. go slightly downward in the previous months even during the severe global financial crisis. It might indicate that during financial crisis investors can still gain some diversification benefits in the early stage if diversifying into emerging Asia. The VAR model with the analysis of forecast error variance decomposition shows the interdependence among regions has intensified after the Asian Financial Crisis. Moreover, it shows that the U.S. stock market is by far the most influential market in the world, and the Latin market is influential but lacks of stability. Lastly, the financial turmoil has brought the global minimum variance portfolio to the forefront. We find out Canadian equity market plays a vital role in the optimal portfolio. Latin market is sometimes very promising. Global diversification can help most regional investors to obtain more gains even in late period.