This paper is made possible thanks to the facility of Thomson Reuters Datastream and Thomson One funded by China Financial Policy Research Center, School of Finance, Renmin University of China. The research is also funded by the MOE of China (Grant No. 12JJD790039).
FINANCIAL CRISIS, RISK PERCEPTION AND THE IMPLIED VOLATILITY TRANSMISSION: A CROSS-REGION STUDY*
Article first published online: 24 AUG 2012
© 2012 The Authors. The Manchester School © 2012 Blackwell Publishing Ltd and The University of Manchester
The Manchester School
Special Issue: Proceedings of the Money, Macroeconomics and Finance Research Group, 2011
Volume 80, Issue Supplement s1, pages 92–120, September 2012
How to Cite
GANG, J., YE, N. and ZHANG, C. (2012), FINANCIAL CRISIS, RISK PERCEPTION AND THE IMPLIED VOLATILITY TRANSMISSION: A CROSS-REGION STUDY. The Manchester School, 80: 92–120. doi: 10.1111/j.1467-9957.2012.02322.x
Manuscript received 7.11.11; final version received 20.5.12.
- Issue published online: 24 AUG 2012
- Article first published online: 24 AUG 2012
This study uses the newly released Hang Seng Volatility Index (VHSI) data set to explore differences of the risk perception between the US and Hong Kong (HK) financial markets as well as the direct sentiment spillover effects across the regions. Results show no fear or exuberance in HK market while significant fear in the USA when the market closes losses two days in a row. Cross-market evidence indicates the existence of fear in the HK market is completely imported from the USA. Direct implied volatility flows one way from USA to HK at first but shows reversal after the financial crisis.