First, this paper estimates the cross-market return and volatility spillovers of Asian stock and bond markets to confirm the existence of intra-regional interdependent effect. Second, by including the mature markets like US, UK and EU member countries in estimation, the global effect can be confirmed.
Third, this paper examines the substantial time-variation in stock (debt) volatility linkages among these countries by rolling regression to compare the spillovers of normal period and those of crisis period. This paper focuses on (1) whether the crisis changed the spillover dynamics, (2) which country had a dominant effect on the Asian financial markets during the Asian currency crisis in 1997, (3) whether the US stock temporarily dominated the volatility transmission during the sub-prime financial crisis in 2008, and (4) whether the EU members’ bonds had a dominant effect on Asian stock and debt markets during the European debt crisis in 2010.
Finally, this paper also uses a different method, i.e., the multivariate GARCH model to make the spillover directions clear. In other words, this method can prove whether the respective volatility transmission had uni- or bi-directional causal relationship.