[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/zbw/cfswop/200702.html
   My bibliography  Save this paper

Measuring financial asset return and volatility spillovers, with application to global equity markets

Author

Listed:
  • Diebold, Francis X.
  • Yilmaz, Kamil
Abstract
We provide a simple and intuitive measure of interdependence of asset returns and/or volatilities. In particular, we formulate and examine precise and separate measures of return spillovers and volatility spillovers. Our framework facilitates study of both non-crisis and crisis episodes, including trends and bursts in spillovers, and both turn out to be empirically important. In particular, in an analysis of sixteen global equity markets from the early 1990s to the present, we find striking evidence of divergent behavior in the dynamics of return spillovers vs. volatility spillovers: Return spillovers display a gently increasing trend but no bursts, whereas volatility spillovers display no trend but clear bursts.

Suggested Citation

  • Diebold, Francis X. & Yilmaz, Kamil, 2007. "Measuring financial asset return and volatility spillovers, with application to global equity markets," CFS Working Paper Series 2007/02, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:200702
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/25503/1/527621862.PDF
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Engle, Robert F & Ito, Takatoshi & Lin, Wen-Ling, 1990. "Meteor Showers or Heat Waves? Heteroskedastic Intra-daily Volatility in the Foreign Exchange Market," Econometrica, Econometric Society, vol. 58(3), pages 525-542, May.
    2. Faust, Jon, 1998. "The robustness of identified VAR conclusions about money," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 49(1), pages 207-244, December.
    3. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    4. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
    5. King, Mervyn & Sentana, Enrique & Wadhwani, Sushil, 1994. "Volatility and Links between National Stock Markets," Econometrica, Econometric Society, vol. 62(4), pages 901-933, July.
    6. Garman, Mark B & Klass, Michael J, 1980. "On the Estimation of Security Price Volatilities from Historical Data," The Journal of Business, University of Chicago Press, vol. 53(1), pages 67-78, January.
    7. Jon Faust, 1998. "The robustness of identified VAR conclusions about money," International Finance Discussion Papers 610, Board of Governors of the Federal Reserve System (U.S.).
    8. Sassan Alizadeh & Michael W. Brandt & Francis X. Diebold, 2002. "Range‐Based Estimation of Stochastic Volatility Models," Journal of Finance, American Finance Association, vol. 57(3), pages 1047-1091, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Diebold, Francis X. & Yilmaz, Kamil, 2015. "Financial and Macroeconomic Connectedness: A Network Approach to Measurement and Monitoring," OUP Catalogue, Oxford University Press, number 9780199338306.
    2. Francis X. Diebold & Kamil Yilmaz, 2011. "Equity Market Spillovers in the Americas," Central Banking, Analysis, and Economic Policies Book Series, in: Rodrigo Alfaro (ed.),Financial Stability, Monetary Policy, and Central Banking, edition 1, volume 15, chapter 7, pages 199-214, Central Bank of Chile.
    3. Cronin, David, 2014. "The interaction between money and asset markets: A spillover index approach," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 185-202.
    4. Diebold, Francis X. & Yilmaz, Kamil, 2012. "Better to give than to receive: Predictive directional measurement of volatility spillovers," International Journal of Forecasting, Elsevier, vol. 28(1), pages 57-66.
    5. Zheng, Tingguo & Zuo, Haomiao, 2013. "Reexamining the time-varying volatility spillover effects: A Markov switching causality approach," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 643-662.
    6. Haakon Kavli & Kevin Kotzé, 2014. "Spillovers in Exchange Rates and the Effects of Global Shocks on Emerging Market Currencies," South African Journal of Economics, Economic Society of South Africa, vol. 82(2), pages 209-238, June.
    7. repec:wyi:journl:002202 is not listed on IDEAS
    8. Zihui Yang & Yinggang Zhou, 2017. "Quantitative Easing and Volatility Spillovers Across Countries and Asset Classes," Management Science, INFORMS, vol. 63(2), pages 333-354, February.
    9. Shu, Chang & He, Dong & Dong, Jinyue & Wang, Honglin, 2018. "Regional pull vs global push factors: China and US influence on Asian financial markets," Journal of International Money and Finance, Elsevier, vol. 87(C), pages 112-132.
    10. Rodolfo C. Moura & Márcio P. Laurini, 2021. "Spillovers and jumps in global markets: A comparative analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5997-6013, October.
    11. Seiler, Volker, 2024. "The relationship between Chinese and FOB prices of rare earth elements – Evidence in the time and frequency domain," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 160-179.
    12. Costola, Michele & Lorusso, Marco, 2022. "Spillovers among energy commodities and the Russian stock market," Journal of Commodity Markets, Elsevier, vol. 28(C).
    13. Francis X. Diebold & Kamil Yilmaz, 2016. "Trans-Atlantic Equity Volatility Connectedness: U.S. and European Financial Institutions, 2004–2014," Journal of Financial Econometrics, Oxford University Press, vol. 14(1), pages 81-127.
    14. Dees, Stéphane, 2016. "Credit, asset prices and business cycles at the global level," Economic Modelling, Elsevier, vol. 54(C), pages 139-152.
    15. David McMillan & Isabel Ruiz & Alan Speight, 2010. "Correlations and spillovers among three euro rates: evidence using realised variance," The European Journal of Finance, Taylor & Francis Journals, vol. 16(8), pages 753-767.
    16. Michael Ehrmann & Marcel Fratzscher & Roberto Rigobon, 2011. "Stocks, bonds, money markets and exchange rates: measuring international financial transmission," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(6), pages 948-974, September.
    17. Vargas-Silva, Carlos, 2008. "Monetary policy and the US housing market: A VAR analysis imposing sign restrictions," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 977-990, September.
    18. Kamil Yilmaz, 2018. "Bank Volatility Connectedness in South East Asia," Koç University-TUSIAD Economic Research Forum Working Papers 1807, Koc University-TUSIAD Economic Research Forum.
    19. Kohonen, Anssi, 2013. "On detection of volatility spillovers in overlapping stock markets," Journal of Empirical Finance, Elsevier, vol. 22(C), pages 140-158.
    20. Francis X. Diebold & Laura Liu & Kamil Yilmaz, 2018. "Commodity Connectedness," Central Banking, Analysis, and Economic Policies Book Series, in: Enrique G. Mendoza & Ernesto Pastén & Diego Saravia (ed.),Monetary Policy and Global Spillovers: Mechanisms, Effects and Policy Measures, edition 1, volume 25, chapter 4, pages 097-136, Central Bank of Chile.
    21. Habibi, Hamidreza & Mohammadi, Hassan, 2022. "Return and volatility spillovers across the Western and MENA countries," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).

    More about this item

    Keywords

    Asset Market; Asset Return; Stock Market; Emerging Market; Market Linkage; Financial Crisis; Herd Behavior; Contagion;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:cfswop:200702. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/ifkcfde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.