Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/303830 
Year of Publication: 
2022
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 10 [Issue:] 1 [Article No.:] 2132634 [Year:] 2022 [Pages:] 1-21
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
China is considered the largest emerging economy and thus investors perceived as an attractive investment. We examine the spillover effect from Chinese stock exchange to stock exchanges of Asia and Latin America, namely, India, Indonesia, Mexico, and Brazil. For empirical purpose, the study employs VARMA-Multivariate Generalized Autoregressive Conditional Heteroskedasticity (MGARCH) model with BEKK, diagonal, Constant Conditional Correlation (CCC), and finally, Dynamic Conditional Correlation (DCC) specifications. DCC model outperforms among others and identifies two diversification opportunities with Mexican (MEXICAN) and Indian stock market (BSE). Finally, the hedge ratio and portfolio weights have been calculated. The hedge ratios between China and Mexico (SSE/MEX), and China and India (SSE/BSE) were 0.01 and 0.06, respectively. This implies that a $1 long position in Chinese market (SSE) could be hedged with a 1 cent short position in Mexico (MEXICAN) and a 6 cent short position in the Indian Market (BSE). The findings of this paper provide an insight into investors and policymakers.
Subjects: 
Asia
China
hedge ratio
Latin America
MGARCH
portfolio weight
JEL: 
C58
F37
G11
G23
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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