Asian Review of Financial Research Vol.15 No.1 pp.189-216
Stock Market Interation and Downside Rick
Key Words : Bivariate GARCH
This study investigates stock market integration and downside risk among several stock markets such as Korean stock market, US stock market and Japanese stock market. This paper is visualizing stock market integration via time-varying correlation derived from bivariate GARCH model. The GJR extension of bivariate GARCH model is used to examine whethet increase or decrease in US stock return has an asymmetric impact on Korean stock market volatilitι According to the empirical findings of this paper, both stock market integration between Korea and US and the stock market integration between Korea and Japan are increasing rapidly after the Korea currency crisis of 1997, but the evidence of downside risk is not strong. Also finding is that the balance of foreign fund inflow in Korean capital market is one of the most important factor in stock market integration.