Volatility Linkage Between the Stock Exchange of Thailand and Major Stock Markets

As global financial markets have become increasingly integrated, their linkage has become one of the most intriguing study areas. Even though there is little research on cointegration among financial markets in advanced and emerging countries, those aiming at the volatility transmission from the leading financial markets to the Stock Exchange of Thailand during crises still need to be expanded. This study investigates the volatility spillover from three leading capital markets, New York, Shanghai, and Japan Stock Exchange on the Stock Exchange of Thailand, using Dynamic Conditional Correlation Multivariate GARCH (DCC-MGARCH). The findings suggest that in the long term, the volatility of the SET index is more sensitive to its past volatility shock than that of the leading stock markets. Still, the impact of the past volatility shock in the major stock markets is more persistent than the impact of its past volatility shock. The return volatility of the SET index has been linked to the return volatility in the NYSE index. The sensitivity of the SET index to the volatility shock on the NYSE increased after the subprime. The spillover was driven further by the COVID-19 pandemic and lessened after the outbreak had recovered. The volatility shock of the SET index has been more persistent recently compared to the pre-subprime period. In contrast, the persistence of the volatility shock in significant stock markets tends to decrease after the subprime financial crisis. These results are applicable in portfolio risk management since the understanding of financial market relationships can help investors lower the risk.