Author(s)

Yeong-Jia Goo, Ming-Chang Yang

Department of Business Administration, National Taipei University, New Taipei City.

Researchers and academic institutions frequently use the conventional Threshold AR model. However, the model uses zero or a single random value as a threshold to convey limited information. This study intends to explore multiple asymmetric threshold effects of U.S. stock market to five major industrialized countries during turbulent economic conditions. Daily stock index returns, ranging from 1998 to 2019, are collected. A three random thresholds TAR model is built; Four hypotheses are proposed; Grid search algorithm is programmed; The testing procedure includes: linear and non-linear unit roots, structural break, likelihood ratio, Wald, and residual diagnoses are tested. The findings are as follows: The four hypotheses are significant in most of five major countries except for U.K. and Germany of contagions effects. The newly proposed multiple TAR model is superior to the traditional TAR model. During the financial crisis period, the contagions effects are greater, the threshold effects are significant, and the combined threshold contagions effects are stronger.

Threshold Regression Models, Financial Crisis, Contagions Effects

Goo, Y. and Yang, M. (2021) An Investigation of Multiple Asymmetric Threshold Contagions Effects of U.S. Stock Market to Major Industrialized Countries under Turbulent Economic Conditions. Modern Economy, 12, 804-825. doi: 10.4236/me.2021.124040.