Global and Regional Sources of Risk in Equity Markets: Evidence from Factor Models with Time-Varying Conditional Skewness

We examine the influence of global and regional factors on the conditional distribution of stock returns from six Asian markets, using factor models in which unexpected returns comprise global, regional and local shocks. The models allow for conditional heteroskedasticity and time-varying conditional skewness, and permit mean, variance and skewness spillovers to be measured. We find that the pattern of spillovers changed in the late 1990s. When spillovers are allowed to vary with the type of news arriving in a market, we find that local news reduces mean spillovers but increases variance spillovers. News about regional countries increases skewness spillovers