DCC analysis of two exchange markets with a factor of Japan dollars: Study of Philippine and Indonesia exchange markets

摘要

This article conducts an empirical investigation examining the model construction and the association between Philippine and Indonesia exchange markets by using the data of Philippine Peso exchange rates against US Dollar and the Indonesia exchange rate against US Dollar from January 2003 to December 2009. In addition, we also adopt Student's t distribution to analyze the proposed model. The empirical results show that the mutual effects of the Philippine and the Indonesia exchange markets may be constructed in bivariate IGARCH (1, 1) model with a DCC. Our findings suggest that there exists a positive relationship between Philippine and Indonesia exchange market returns, that is, the volatilities of these two exchange market returns are synchronously influence. Furthermore, the average estimator of the DCC coefficients of two exchange market returns equals to 0.3067. The Japan exchange rate return volatility will also affect the variation risk of the Philippine exchange market; likewise the Japan exchange rate return volatility will impact the variation risk of the Indonesia's exchange market. Additionally, Philippine and Indonesia stock markets do not have the asymmetrical effect in the research data period.