Volatility spillover effects from Japan and the US to the Pacific-Basin

This study examines the magnitude and changing nature of volatility spillov ers from Japan and the US to six Pacific-Basin equity markets. I construct a volatility spillover model which allows the unexpected return of any part icular Pacific-Basin market be driven by a local idiosyncratic shock, a reg ional shock from Japan and a global shock from the US. I find that over and above the impact of the world factors, there are significant spillovers fr om the region to many of the Pacific-Basin countries. Liberalization events (such as capital market reform and country fund launching), exchange rate changes, number of DR listings, sizes of trade, and country fund premium ar e shown to affect the relative importance of the world and regional market factors over time. (C) 2000 Elsevier Science Ltd. All rights reserved.