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 Medicaltype
Chinese tourists to dampen the shocks that arise from having fewer Chinese
tourists to Taiwan