Testing volatility spillovers using GARCH models in the Japanese stock market during COVID-19

Investment Management & Financial Innovations

Elena Loredana Minea¹  Ramona Birau²  Jatin Trivedi³  Iqbal Thonse Hawaldar⁴  Cristi Spulbar⁵ 

[1] Ph.D. Student, Faculty of Economics and Business Administration, University of Craiova;Ph.D., Faculty of Education Science, Law and Public Administration, C-tin Brancusi University of Targu Jiu;Ph.D., National Institute of Securities Markets;Ph.D., Professor, College of Business Administration, Kingdom University;Ph.D., Professor, Faculty of Economics and Business Administration, Doctoral School of Economic Sciences, University of Craiova;

关键词: COVID-19 pandemic;    GARCH family models;    global financial crisis;    leverage effect;    transmission patterns;    volatility clustering;   

DOI  :  10.21511/imfi.19(1).2022.20

来源: DOAJ

【 摘 要 】

This paper investigates volatility spillovers in the stock market in Japan during the COVID-19 pandemic by using GARCH family models. The empirical analysis is focused on the dynamics of the NIKKEI 225 stock market index during the sample period from July 30, 1998, to January 24, 2022. In other words, the sample period covers both the period of the global financial crisis (GFC) and the COVID-19 pandemic. The econometrics includes GARCH (1,1), GJR (1,1), and EGARCH (1,1) models. By applying GARCH family models, this empirical study also examines the long-term behavior of the Japanese stock market.The Japanese stock market is much more stable and efficient than emerging or frontier markets characterized by higher volatility and lower liquidity. The paper establishes that NIKKEI 225 index dynamics is different in intensity in the case of the two most recent extreme events analyzed, namely the global financial crisis (GFC)of 2007–2008 and the COVID-19 pandemic. The findings confirmed the presence of the leverage effect during the sample period. Moreover, the empirical results identified the presence of high volatility in the sample returns of the selected stock market. Nevertheless, the econometric framework showed that the negative implications of the GFC were much more severe and caused more significant contractions compared to the COVID-19 pandemic for the Japanese stock market. This study contributes to the existing literature by providing additional empirical evidence on the long-term behavior of the stock market in Japan, especially in the context of extreme events.

【 授权许可】

Unknown