| By: |
Chia-Lin Chang (Department of Applied economics, Department of Finance National Chung Hsing University, Taiwan.);
Shu-Han Hsu (Department of Applied economics National Chung Hsing University, Taiwan.);
Michael McAleer (Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute Erasmus School of Economics Erasmus University Rotterdam, The Netherlands and Department of Quantitative Economics Complutense University of Madrid, Spain And Institute of Advanced Sciences Yokohama National University, Japan.) |
| Abstract: |
Since 2008, when Taiwan’s President Ma Ying-Jeou relaxed the Cross-Strait
policy, China has become Taiwan’s largest source of international tourism. In
order to understand the risk persistence of Chinese tourists, the paper
investigates the short-run and long-run persistence of shocks to the change
rate of Chinese tourists to Taiwan. The daily data used for the empirical
analysis is from 1 January 2013 to 28 February 2018. McAleer’s (2015)
fundamental equation in tourism finance is used to link the change rate of
tourist arrivals and the change in tourist revenues. Three widely-used
univariate conditional volatility models, namely GARCH(1,1), GJR(1,1) and
EGARCH(1,1), are used to measure the short-run and long-run persistence of
shocks, as well as symmetric, asymmetric and leverage effects. Three different
Heterogeneous AutoRegressive (HAR) models, HAR(1), HAR(1,7) HAR(1,7,28), are
considered as alternative mean equations for capturing a variety of long
memory effects. The mean equations associated with GARCH(1,1), GJR(1,1) and
EGARCH(1,1) are used to analyse the risk persistence of the change in Chinese
tourists. The exponential smoothing process is used to adjust the seasonality
around the trend in Chinese tourists. The empirical results show asymmetric
impacts of positive and negative shocks on the volatility of the change in the
number of Group-type and Medical-type tourists, while Individual-type tourists
display a symmetric volatility pattern. Somewhat unusually, leverage effects
are observed in EGARCH for Medical-type tourists, which shows a negative
correlation between shocks in tourist numbers and the subsequent shocks to
volatility. For both Group-type and Medical-type tourists, the asymmetric
impacts on volatility show that negative shocks have larger effects than do
positive shocks. The leverage effect in EGARCH for Medical-type tourists
implies that larger shocks would decrease volatility in the change in the
numbers of Medical-type tourists. These results suggest that Taiwan tourism
authorities should act to prevent the negative shocks for the Group-type and
Medical-type Chinese tourists to dampen the shocks that arise from having
fewer Chinese tourists to Taiwan. |