Lifting Wavelet Based Volatility Spillover Effect Analysis of Stock Markets in the Greater China Region

The volatility of a stock market is affected by both their own former fluctuations and other market fluctuations in the past, but how this effect come into being is rarely mentioned before. Through volatility spillover research of three markets in the Greater China Region, this paper aims at identifying whether the market´s volatility spillover effect is due to special events, or because of the existence of such interdependence among markets. First, the paper makes an analysis of GARCH residuals spillover among three markets in China over two periods. Then, using lifting wavelet method to extract the GARCH residuals data and remove outliers, the paper finally analyzes the causes of spillover effects among the three markets and the link between the three markets.