The Volatility Transmission between the Korean and US Financial Markets

Yeom, Myeong Hoon; Baek, Jae Seung; Ryu, Doo Jin

Korean Journal of Financial Studies 2014;43(1):213-236.
Published online February 28, 2014.

Myeong Hoon Yeom, Jae Seung Baek, Doo Jin Ryu

한국과 미국 금융시장 간의 변동성 동조화 현상에 관한 연구

염명훈, 백재승, 류두진

Abstract

We examine the volatility transmission and convergence effects between the Korean and US financial markets. Based on the VAR (Vector Auto regression) framework, we analyze the dynamics of implied volatilities of the two markets during the sample period from 1998 to 2013. Our empirical findings are as follows. First, though the implied volatility of the Korean equity market was twice larger than that of the US market before 2000, the difference between the volatilities has been continuously decreased since 2000. Second, individual and institutional trades positively contribute to the volatility transmission effect whereas foreign trades negatively contribute to the effect. Third, the trading activity in the KOSPI200 nighttime futures and options has a negative effect on the volatility transmission, yet, the effect is not highly significant.

Key Words: 내재변동성,미국시장,변동성 동조화,투자자별 유형,한국시장,Implied Volatility,Investor Type,Korean Market,US Market,Volatility Transmission