Dynamic transmissions between main stock markets and SME stock markets: evidence from tropical economies

Nguyen, Thi Minh Trang, Chaiechi, Taha, Eagle, Lynne, and Low, David (2020) Dynamic transmissions between main stock markets and SME stock markets: evidence from tropical economies. Quarterly Review of Economics and Finance, 75. pp. 308-324.

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This paper investigates the dynamic return and asymmetric volatility transmissions between main stock markets and Small and Medium Enterprise (SME) stock markets in Hong Kong, Singapore, Thailand, and Malaysia under the joint impacts of volatility breaks, thin trading, and trading volume. For the analysis, a linear state-space AR model with Kalman filter and an augmented bivariate VAR asymmetric BEKK-GARCH model were adopted. The results reveal that only Hong Kong showed evidence of return transmission from the SME market to the main market. Controlling for the joint effects of the three factors considerably reduced the magnitude and significance level of this return transmission and, in essence, eliminates the volatility transmission. Moreover, Hong Kong's main market return exhibited a causal relationship and a long-run equilibrium relationship with the country's economic development. Therefore, the SME market arguably can make an indirect contribution to economic development in Hong Kong via its return transmission across the main market. Consequently, any policies that facilitate the development of the SME market in this country would promote long-term economic stimulation indirectly through its transmission mechanism with the main market.

Item ID: 57659
Item Type: Article (Research - C1)
ISSN: 1878-4259
Keywords: SME stock market; return and asymmetric volatility transmissions; volatility break; thin trading; trading volume; augmented bivariate VAR asymmetric BEKK-GARCH
Copyright Information: © 2019 Board of Trustees of the University of Illinois. Published by Elsevier Inc. All rights reserved.
Date Deposited: 26 Mar 2019 07:05
FoR Codes: 38 ECONOMICS > 3801 Applied economics > 380107 Financial economics @ 50%
38 ECONOMICS > 3802 Econometrics > 380205 Time-series analysis @ 50%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9102 Microeconomics > 910206 Market-Based Mechanisms @ 100%
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