Abstract

Globalization and development in information technology makes it easier for investor in obtaining global information. In this condition, volatility in domestic capital market could be affected by volatility from global stock markets. That concern will be answered in this research: volatility spillover in Indonesia, USA, and Japan capital market. This research using daily return data from each country from January 2004 until December 2008 employing econometric model generalized autoregressive conditional heteroscedasticity (GARCH) (1,1). The result shows that there is volatility spillover between Indonesia and USA (Indonesia affected by USA). Meanwhile, there is bidirectional volatility spillover between Indonesia and Japan (Indonesia affected by Japan, and vice versa).

Key words: Volatility, spillover, generalized autoregressive conditional heteroscedasticity (GARCH).