Abstract
This study examines volatility spillovers from developed markets of the United States and Japan to emerging markets in Asian-Pacific region during the period of two crises: 1997 Asian currency crisis and 2007 subprime credit crisis. Using recently developed bivariate multiplicative error model to examine volatility spillovers between the two stock markets, we find that the US market is more influential than the Japanese market for volatility transmissions to the Asian markets even though volatility spillovers from both the US and Japan to Asian countries are statistically significant. Additionally, the increasing spillovers of volatility from the US and Asian markets to Japan could be found as a result of the recent subprime financial crisis, while Japanese stock market is independent of other markets over the other three sub-periods. In addition, the volatility spillovers vary over time as they increase substantially after 1997 Asian currency crisis and their directions change dramatically after 2007 subprime credit crisis.