Asymmetric Cross Market Volatility Spillovers
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Author | : Nicholas Apergis |
Publisher | : |
Total Pages | : |
Release | : 2008 |
Genre | : |
ISBN | : |
We investigate cross-market volatility spillover effects across New York and London foreign exchange and equity markets. By using several daily data-sets, each relating to a different time of the day, and the generalized autoregressive conditional heteroscedasticity approach, the empirical analysis found volatility spillover effects (meteor shower effects) from the foreign exchange market in London and New York to the equity market in New York and London, respectively. By contrast, the results did not show volatility spillover effects from the equity markets to the foreign exchange markets across New York and London. Copyright 2001 by Blackwell Publishers Ltd and The Victoria University of Manchester.
Author | : Bo Guan |
Publisher | : |
Total Pages | : 0 |
Release | : 2023 |
Genre | : |
ISBN | : |
This paper uses a Multiplicative Error Model (MEM) framework to investigate the asymmetric volatility spillovers among four major global asset markets: stock, bond, gold, and crude oil. It provides evidence that those spillovers are influenced by different events and economic conditions that vary across time. It identifies markets that are net providers and net takers of spillovers in each market. Specifically, we find that the stock market is the net provider, while the bond and gold markets play a mixed role. We also show that the spillover effects are mostly negative for the stock and crude oil markets and mostly positive for the bond market. We further shed light on the role of safe-haven assets at times of market turmoil by showing that these assets can play a significant role in mitigating spillover effects and providing investors with hedging opportunities. These findings have important implications for investors, who are seeking to manage risks, and policymakers, who are interested in stabilizing the markets. Keywords: asymmetric volatility spillovers, global asset markets, Multiplicative Error Model (MEM), spillover balance index.
Author | : Zihui Yang |
Publisher | : |
Total Pages | : |
Release | : 2016 |
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ISBN | : |
We document asymmetric networks of implied volatility spillovers across global stock and commodity markets as well as the US Treasury market. There are significant asymmetries in the roles of US stock and bond markets as volatility suppliers to other countries and markets. Shocks from the US generate intensifying volatility spillovers across countries and asset classes. Our findings offer new evidence for the recent theory that shocks from an individual market or sector can lead to sizable aggregate fluctuations if network linkages are sufficiently asymmetric. We also provide a new tool for event studies in a network setting.
Author | : Mark Watson |
Publisher | : Oxford University Press |
Total Pages | : 432 |
Release | : 2010-02-11 |
Genre | : Business & Economics |
ISBN | : 0199549494 |
A volume that celebrates and develops the work of Nobel Laureate Robert Engle, it includes original contributions from some of the world's leading econometricians that further Engle's work in time series economics
Author | : Prashant Mahesh Joshi |
Publisher | : |
Total Pages | : 8 |
Release | : 2018 |
Genre | : |
ISBN | : |
The study examines the return and volatility spillover among Asian stock markets in India, Hong Kong, Japan, China, Jakarta, and Korea using a six-variable asymmetric generalized autoregressive conditional heteroscedasticity-Baba, Engle, Kraft, and Kroner (GARCH-BEKK) model during February 2, 2007, to February 29, 2010. The author finds evidence of bidirectional return, shock, and volatility spillover among most of the stock markets. The magnitude of volatility linkages is low indicating weak integration of Asian stock markets. The study finds that own volatility spillover is higher than cross-market spillover. The overall persistence of stock market volatility is highest for Japan (0.931) and lowest for China (0.824). The implication of weak integration is that investors will benefit from reduction of diversifiable risk.
Author | : Ángel Pardo Tornero |
Publisher | : |
Total Pages | : 38 |
Release | : 2009 |
Genre | : |
ISBN | : |
We study the profitability of trading strategies based on volatility spillovers between large and small firms. By using the Volatility Impulse-Response Function of Lin (1997) and its extensions, we detect that any volatility shock coming from small companies is important to large companies, but the reverse is only true for negative shocks coming from large firms. To exploit these asymmetric patterns in volatility, different trading rules have been designed based on the inverse relationship existing between expected return and volatility. We find that most strategies generate excess after-transaction profits, especially after very bad news and very good news coming from large or small firm markets. These results are of special interest because of implications for risk and portfolio management.
Author | : Pardeep Singh |
Publisher | : |
Total Pages | : 13 |
Release | : 2015 |
Genre | : |
ISBN | : |
Volatility spillover among major equity markets has long fascinated academicians and researchers alike. This paper presents an elaborate survey and analysis of the literature on the subject. Review of extant studies on various basis such as markets studied, methodology employed, among others has important implications for various stakeholders. We report that there has been wide variation in results because different studies have examined different markets using wide range of financial econometric methodologies. Some have considered only volatility or both volatility and spillover. Still others have incorporated the impact of global financial crisis on volatility spillover. Future researchers should examine if there is any volatility spillovers between various sectors of an economy, between different financial markets of the same economy, amongst same sectors of different markets, probe whether size effect is relevant, identify the transmission channels of volatility spillover, enumerate reasons behind volatility spillover, examine asymmetric volatility responses among stock markets and can use more advanced econometric techniques.
Author | : Francis X. Diebold |
Publisher | : Oxford University Press |
Total Pages | : 285 |
Release | : 2015-02-03 |
Genre | : Business & Economics |
ISBN | : 0199338329 |
Connections among different assets, asset classes, portfolios, and the stocks of individual institutions are critical in examining financial markets. Interest in financial markets implies interest in underlying macroeconomic fundamentals. In Financial and Macroeconomic Connectedness, Frank Diebold and Kamil Yilmaz propose a simple framework for defining, measuring, and monitoring connectedness, which is central to finance and macroeconomics. These measures of connectedness are theoretically rigorous yet empirically relevant. The approach to connectedness proposed by the authors is intimately related to the familiar econometric notion of variance decomposition. The full set of variance decompositions from vector auto-regressions produces the core of the 'connectedness table.' The connectedness table makes clear how one can begin with the most disaggregated pair-wise directional connectedness measures and aggregate them in various ways to obtain total connectedness measures. The authors also show that variance decompositions define weighted, directed networks, so that these proposed connectedness measures are intimately related to key measures of connectedness used in the network literature. After describing their methods in the first part of the book, the authors proceed to characterize daily return and volatility connectedness across major asset (stock, bond, foreign exchange and commodity) markets as well as the financial institutions within the U.S. and across countries since late 1990s. These specific measures of volatility connectedness show that stock markets played a critical role in spreading the volatility shocks from the U.S. to other countries. Furthermore, while the return connectedness across stock markets increased gradually over time the volatility connectedness measures were subject to significant jumps during major crisis events. This book examines not only financial connectedness, but also real fundamental connectedness. In particular, the authors show that global business cycle connectedness is economically significant and time-varying, that the U.S. has disproportionately high connectedness to others, and that pairwise country connectedness is inversely related to bilateral trade surpluses.
Author | : Sofiane Aboura |
Publisher | : |
Total Pages | : 35 |
Release | : 2015 |
Genre | : |
ISBN | : |
This article adopts the asymmetric DCC with one exogenous variable (ADCCX) model developed by Vargas (2008), by updating the concept of 'volatility surprise' to capture cross-market relationships. Current methods for measuring spillovers do not focus on volatility interactions, and neglect cross-effects between the conditional variances. This paper aims to fill this gap. The dataset includes four aggregate indices representing equities, bonds, foreign exchange rates and commodities from 1983 to 2013. The results provide strong evidence of spillover effects coming from the 'volatility surprise' component across markets. Against the background of the recent financial crisis, the aim is to contribute to the literature on the interdependencies of financial markets, both in conditional means and (co)variances. In addition, asset management implications are derived.
Author | : OECD |
Publisher | : OECD Publishing |
Total Pages | : 136 |
Release | : 2017-04-19 |
Genre | : |
ISBN | : 9264272321 |
This report describes the development of the green bond market as an innovative instrument for green finance, and provides a review of policy actions and options to promote further market development and growth. Since 2007-08, so-called “green bonds” have emerged and the market has risen from ...