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Information Content in International Equity Volatility on Yuan’s Depreciation


Affiliations
1 Department of Finance, Deakin University, Melbourne - 3125, Victoria, Australia
2 Department of Finance, Deakin Business School, Deakin University, Melbourne - 3125, Victoria, Australia
 

We investigate whether depreciation of USD-CNY exchange rate causes direct or indirect effects on conditional variances in the international equity markets, especially of Japanese, ASEAN, Australian, and Indian markets. Employing APARCH and using MSCI indices we find a significant positive impact of Yuan’s depreciation on the conditional variances of Japanese, ASEAN and Australian equity markets. When USD-CNY exchange rate depreciates by 0.25 percent or more, volatility in the Chinese equity market causes a significant positive impact on the conditional volatility in the Japanese and Australian equity markets, though with some lag. USD-CNY exchange rate movements strongly influence the ASEAN equity markets across all time frames. The findings may enable investors to manage their portfolios of equity markets under consideration in the presence or absence of USD-CNY movements.

Keywords

China, Information Contents, Stock Return, Transmission, Volatility.
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  • Information Content in International Equity Volatility on Yuan’s Depreciation

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Authors

Amanjot Singh
Department of Finance, Deakin University, Melbourne - 3125, Victoria, Australia
Harminder Singh
Department of Finance, Deakin Business School, Deakin University, Melbourne - 3125, Victoria, Australia

Abstract


We investigate whether depreciation of USD-CNY exchange rate causes direct or indirect effects on conditional variances in the international equity markets, especially of Japanese, ASEAN, Australian, and Indian markets. Employing APARCH and using MSCI indices we find a significant positive impact of Yuan’s depreciation on the conditional variances of Japanese, ASEAN and Australian equity markets. When USD-CNY exchange rate depreciates by 0.25 percent or more, volatility in the Chinese equity market causes a significant positive impact on the conditional volatility in the Japanese and Australian equity markets, though with some lag. USD-CNY exchange rate movements strongly influence the ASEAN equity markets across all time frames. The findings may enable investors to manage their portfolios of equity markets under consideration in the presence or absence of USD-CNY movements.

Keywords


China, Information Contents, Stock Return, Transmission, Volatility.

References





DOI: https://doi.org/10.18311/jbt%2F2019%2F23685