This paper examines the size effects of volatility spillovers for firm performance and exchange rates with asymmetry in the Taiwan tourism industry. The analysis is based on two conditional multivariate models, BEKK-AGARCH and VARMA-AGARCH, in the volatility specification. Daily data from 1 July 2008 to 29 June 2012 for 999 firms are used, which covers the Global Financial Crisis. The empirical findings indicate that there are size effects on volatility spillovers from the exchange rate to firm performance. Specifically, the risk for firm size has different effects from the three leading tourism sources to Taiwan, namely USA, Japan, and China. Furthermore, all the return series reveal quite high volatility spillovers (at over sixty percent) with a one-period lag. The empirical results show a negative correlation between exchange rate returns and stock returns. However, the asymmetric effect of the shock is ambiguous, owing to conflicts in the significance and signs of the asymmetry effect in the two estimated multivariate GARCH models. The empirical findings provide financial managers with a better understanding of how firm size is related to financial performance, risk and portfolio management strategies that can be used in practice.

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Keywords BEKK, Financial performance, MGARCH, Size effects, Small-firm effects, Spillover effects, Tourism, VARMA
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Conference 20th International Congress on Modelling and Simulation - Adapting to Change: The Multiple Roles of Modelling, MODSIM 2013 - Held jointly with the 22nd National Conference of the Australian Society for Operations Research, ASOR 2013 and the DSTO led Defence Operations Research Symposium, DORS 2013
Chang, C-L, Hsu, H-K, & McAleer, M.J. (2020). Volatility spillovers for stock returns and exchange rates of tourism firms in Taiwan. In Proceedings - 20th International Congress on Modelling and Simulation, MODSIM 2013 (pp. 1333–1337). Retrieved from