Premium
In the Shadow of the U nited S tates: The International Transmission Effect of Asset Returns
Author(s) -
Chang KuangLiang,
Chen NanKuang,
Leung Charles Ka Yui
Publication year - 2013
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12008
Subject(s) - economics , stock (firearms) , monetary economics , volatility (finance) , asset (computer security) , financial economics , econometrics , computer security , computer science , mechanical engineering , engineering
We examine how fluctuations in financial and housing markets in the United States affect asset returns and GDP in H ong K ong. In contrast to studies using linear specifications, which find that the United States and H ong K ong are virtually delinked in terms of the asset markets, our regime‐switching models indicate that an unexpected change in US stock returns, followed by the TED spread, has the most significant effect on Hong Kong asset returns and GDP , typically in a regime of high return and low volatility. For in‐sample one‐step‐ahead forecasting, the US term spread is the best predictor.