Return and Volatility Spillovers between Japanese and Chinese Stock MarketsFAn Analysis of Overlapping Trading Hours with High-frequency Data

In this paper we analyze return and volatility spillovers during overlapping trading hours between China (Shanghai Composite Index) and Japan (Nikkei 225 Index) using intraday high-frequency data. We first adjusted the 5-min. returns for intraday periodicity with Flexible Fourier Form (FFF). Then these data are used to estimate a FIAPARCH model the standard residuals of which are then employed to test for causality in mean and in variance with a cross-correlation function (CCF) approach. The results indicate a unidirectional influence from China to Japan both in terms of return and volatility. Further, volatility spillover arises with some delay after a return spillover.