Intraday Price and Volatility Spillovers between Japanese and Korean Stock Markets

This study investigates the intraday price and volatility spillover effect between the Japanese market and the Korean market, using a VAR-asymmetric BEKK GARCH model. In particular, the study considers three high-frequency (10-min, 30-min, and 1-hour) intraday datasets of TOPIX and KOSPI200 markets. The empirical results indicate a bi-directional price spillover effect in the 10-min intervals, but a uni-directional price spillover from the TOPIX market to KOSPI200 market in the 30-min and 1-hour time intervals. Regarding the volatility spillover effect, the estimation of the asymmetric BEKK GARCH model indicates evidence of bi-directional volatility spillover in the 10-min intervals, whereas the volatility spillover becomes weak with an increase in the length of time intervals (30-min and 1-hour). In addition, the cross-market asymmetric response is evident from the TOPIX market to the KOSPI200 market in all time intervals. These findings provide an important guideline on arbitrage strategies and risk management over very short time periods.