DCC Analysis of Two Stock Returns Volatility with Two Factors of MSCI Global and Europe Market Indices: Study of Thailand and Malaysia Stock Markets

This paper uses the Thailand and the Malaysia´s stock prices of material from January, 2004 to December, 2009, discussing the model construction and their association between Thailand and Malaysia´s stock markets, and also uses Student´s t distribution to analyze the proposed model. The empirical results show that the mutual effects of the Thailand and the Malaysia´s stock markets may construct bivariate IGARCH (1, 1) model with a DCC. The empirical results also show that Thailand and Malaysia´s stock market returns present the positive relation. Namely, these two stock market returns´ volatility are synchronized influenced, and the average estimation value of the DCC coefficient of two stock market returns amounts to 0.326. Also, Thailand and Malaysia´s stock markets do not have the asymmetrical effect in the research data period. The variation risk of the Thailand´s and the Malaysia´s stock markets does not receive the effect of the MSCI global index and MSCI Europe market index.