در جستجوی برای حق بیمه ریسک و سرایت آن در بازار ارز خارجی آسیا و اقیانوس آرام

This article tests pure contagion effects among four Asian foreign exchange markets, namely, Japan, Hong Kong, Singapore, and Taiwan during the 1997 Asian crisis. A conditional version of international capital asset pricing model (ICAPM) in the absence of purchasing power parity (PPP) is used to control for economic fundamentals or systematic risks. The empirical results show strong contagion effects in both conditional means and volatilities of those markets after systematic risks have been accounted for. Specifically, the contagion-in-mean effects are mainly driven by the past return shocks in Hong Kong, Singapore, and Taiwan. As for contagion in volatility, the lead/lag relationships appear to be multidirectional among Japan, Singapore, and Taiwan, but between Hong Kong and Singapore, and between Hong Kong and Taiwan, they are unidirectional, with Hong Kong playing the dominant role in generating negative volatility shocks. In addition, the conditional ICAPM with asymmetric multivariate general autoregressive conditional heteroscedastic in mean (MGARCH(1,1)-M) structure is able to explain/predict on average 17.28% of the return variations in those markets. Therefore, this study provide a further evidence that the time-varying risk premium is a very strong candidate in explaining the predictable excess return puzzle [Lewis, K. K. (1994). Puzzles in international financial markets. NBER Working Paper No. 4951] since the risk premia founded in this article are not only statistically significant but also economically significant.

Due to a series of financial crises in 1990s, the study of the transmission of financial shocks/crisis across markets/countries has become one of the most intensive research topics in international financial literature in recent years. Previous articles on this topic have failed to take into account an important distinction between the two concepts of interdependence and contagion. Masson (1998) argues that there are three main channels that financial markets turbulence can spread from one country to another. They are monsoonal effects, spillovers, and pure contagion effects. “Monsoonal” effects, or “contagions from common causes,” tend to occur when affected countries have similar economic fundamentals or face common external shocks. The second type of financial market interlinkages arises from spillover effects, which may be due to trade linkages or financial interdependence. The first two channels of financial crises can be categorized as fundamental-driven crises since the affected countries share some macroeconomic fundamentals, which implies that the transmission of financial crises is due to the interdependence among those countries and not necessarily due to contagion. The third transmission channel is the pure contagion effect. Contagion here refers to the cases where crisis in one country triggers a crisis elsewhere for reasons unexplained by macroeconomic fundamentals. For instance, a crisis in one country may lead creditors and investors to pull out from other countries over which they have a poor understanding resulting from information asymmetries. The goal of this article is to test the pure contagion effects among four Asian foreign exchange markets, namely, Japan, Hong Kong, Singapore, and Taiwan during the 1997 Asian crisis. Specifically, in this article, I define “contagion” as significant spillovers of country-specific idiosyncratic shocks during the crisis after economic fundamentals or systematic risks have been accounted for. In testing for contagion, its existence depends on the economic fundamentals used. Unfortunately, there is disagreement on the definitions of the fundamentals. To control for the economic fundamentals, most empirical studies tend to choose those fundamentals arbitrarily, such as by using macroeconomic variables, dummies for important events, and time trends. The problem with these control variables is that contagion is not well defined without reference to a theory. To overcome this problem, I rely on an international capital asset pricing model (ICAPM) in the absence of purchasing power parity (PPP), which provides a theoretical basis in selecting economic fundamentals. The economic fundamentals under ICAPM are the world market and foreign exchange risks, so the evidence of contagion is based on testing whether idiosyncratic risks—the part that cannot be explained by the world market and foreign exchange risks—are significant in describing the dynamics of conditional mean and volatility in Asian foreign exchange markets during the crisis. The ICAPM used in this article also provides another avenue to test the existence of risk premium in foreign exchange markets since previous empirical studies using consumption-based asset pricing model to test the existence of risk premium in explaining the predictable excess return puzzle (Lewis, 1994) have not been very successful.1 In addition to the contribution in overcoming the drawback of arbitrarily choosing economic fundamentals in testing contagion effects in previous studies, another contribution of this article is methodology used to test those effects. In particular, I utilize an asymmetric multivariate general autoregressive conditional heteroscedastic in mean (MGARCH-M) approach to model the conditional mean and asymmetric volatility spillovers during the crisis, in addition to capturing the time dependencies in the second moments of asset returns, a stylized property found in most financial time series, which has been ignored by most empirical studies on contagion.2 Furthermore, the ICAPM in the absence of PPP with MGARCH-M parameterization adopted in this article also overcomes the drawbacks in previous studies in testing risk premium hypothesis in explaining the predictable excess returns puzzle, and thus provides a new inside on the test of risk premium hypothesis. For example, Mark (1988) uses a single-beta CAPM to price forward foreign exchange contracts and specifies the betas as ARCH-like process. He estimates the model jointly for four currencies using a generalized method of moments (GMM) procedure. His results show significant time variation for the betas, and tests of the overidentifying restrictions are not rejected. However, as pointed out by Mark, the GMM estimator is robust, but, in general, is not asymptotically efficient. Consequently, instead of using GMM estimation, McCurdy and Morgan (1991) also apply the single-beta CAPM with a bivariate GARCH parameterization to price deviations from UIP for five major currencies. They estimate their model currency by currency, while Mark (1988) estimates his model jointly across currencies, so the efficiency might be sacrificed in McCurdy and Morgan's study because cross-asset correlations and parameter restrictions are ignored. To maintain the efficiency, Tai (2001) applies MGARCH-M to test risk premium hypothesis, but similar to Mark (1988) and McCurdy and Morgan (1991), he assumes that PPP holds, and thus ignores foreign exchange risk. Therefore, under the fully parameterized multivariate model adopted in this article, not only is the maximum efficiency gain retained in controlling the systematic risks when testing the contagion effects, but also some interesting statistics are recovered, which are mostly ignored in previous studies.3 In addition, the test of ICAPM in the absence of PPP provides a new insight on the sources of time-varying risk premium in foreign exchange markets. The empirical results show strong contagion effects in both the conditional means and volatilities of foreign exchange returns after systematic risks have been accounted for. Specifically, the contagion-in-mean effects are mainly driven by the past return shocks in Hong Kong, Singapore, and Taiwan. As for contagion in volatility, the lead/lag relationships appear to be multidirectional among Japan, Singapore, and Taiwan, but between Hong Kong and Singapore, and between Hong Kong and Taiwan, they are unidirectional, with Hong Kong playing the dominant role in generating negative volatility shocks. The remainder of the article is organized as follows. Section 2 presents the theoretical asset pricing model used to control for systematic risks when testing pure contagion effects. Section 3 describes the econometric methodology employed to estimate the model and several test hypotheses are presented in Section 4. Section 5 describes the data and empirical results are reported in Section 6. Some conclusions are offered in Section 7.

This article tests whether there are pure contagion effects in both conditional means and volatilities of Asian foreign exchange markets during the 1997 Asian crisis. Previous studies on contagion have failed to take into account the important distinction between the two concepts of interdependence and contagion. Specifically, in this article, I define “contagion” as significant spillovers of country-specific idiosyncratic shocks during the crisis after economic fundamentals or systematic risks have been accounted for. To control for the economic fundamentals, I rely on an ICAPM in the absence of PPP, which provides a theoretical basis in selecting economic fundamentals. The economic fundamentals under ICAPM are the world market and foreign exchange risks, so the evidence of contagion is based on testing whether idiosyncratic risks—the part that cannot be explained by the world market and foreign exchange risks—are significant in describing the dynamics of conditional mean and volatility in Asian foreign exchange markets during the crisis. The empirical results indicate strong contagion effects in both the conditional means and volatilities of those markets after systematic risks have been accounted for. Specifically, the contagion-in-mean effects are mainly driven by the past return shocks in Hong Kong, Singapore, and Taiwan. As for contagion in volatility, the lead/lag relationships appear to be multidirectional among Japan, Singapore, and Taiwan, but between Hong Kong and Singapore, and between Hong Kong and Taiwan, they are unidirectional, with Hong Kong playing the dominant role in generating negative volatility shocks. In addition, the conditional ICAPM with asymmetric MGARCH(1,1)-M structure is able to explain/predict on average 17.28% of the return variations in those markets. Therefore, this study provides a further evidence that the time-varying risk premium is a very strong candidate in explaining the predictable excess return puzzle since the risk premia founded in this article are not only statistically significant but also economically significant.