Volatility Spillovers between the US and China Stock Markets: Structural Break Test with Symmetric and Asymmetric GARCH Approaches

The paper examines the short-run spillover effects of daily stock returns and volatilities between the Standard Poor's (SP) 500 stock index in the US and the Shanghai Stock Exchange (SSE) index in China. First, we find that a structural break occurred in the SSE stock return mean in December 2005. Second, by analyzing modified general autoregressive conditional heteroscedasticity (GARCH)(1,1)-M models, we find evidence of a symmetric and asymmetric volatility spillover effect from the US to the China stock market in the post-break period. Third, we observe the symmetric volatility spillover effect from China to the US in the post-break period.