Are volatility spillovers between currency and equity market driven by economic states? Evidence from the US economy

Another look at value and momentum: volatility spillovers

“…Our results demonstrate that the intensity of volatility spillovers between value and momentum strategies varies considerably over time. Consistent with the recent literature on volatility spillovers between different markets and asset classes (e.g., Diebold and Yilmaz 2009;Grobys 2015;Greenwood-Nimmo et al 2016;Ribeiro and Curto 2017), we document persistent periods of low as well as high volatility spillovers between value and momentum returns. Interestingly, we also find that the intensity of the spillovers may change substantially in very short periods of time.…”

“…When compounding the h-step forecast error variance, we stuck the elements in a 2 × 2 matrix defined as 2 k (h) . Following Diebold and Yilmaz (2009) and Grobys (2015), we construct the volatility spillover index between the value and momentum factor portfolios by summing up all elements above and below the main diagonal of 2 k (h) and dividing it by the total sum of all elements in 2 k (h) , which is the part of the volatilities of the value and momentum returns that is unexplained by their own volatilities.…”

“…Similar to Grobys (2015), we employ a rolling estimation window of 60 months and a forecast-error variance decomposition using a horizon of 1 month (i.e., h = 1). We update our rolling-window estimates at the beginning of each month to obtain 1-month-ahead forecasts of volatility spillovers between the value and momentum portfolios over the period December 1931 to September 2015.…”

Dynamics of volatility spillover between stock market and foreign exchange market: evidence from Asian Countries

“…Most of the studies have focused on the transmission of volatility between foreign exchange market and stock market. The developed countries have been extensively studied by most of researchers (see for example; Antonakakis 2012; Apergis and Rezitis 2001;Beer and Hebein 2011;Ebrahim 2000;Francis et al 2006;Grobys 2015;Kanas 2000;Yang and Doong 2004). There are also number of studies of integration of foreign exchange market and stock market of developing countries (for example; Choi et al 2010;Kang and Yoon 2013;Mishra et al 2007;Morales 2008;O'Donnell and Morales 2009;Qayyum and Kamal 2006;Yang and Chang 2008).…”

The effect of quantitative easing on the variance and covariance of the UK and US equity markets

“…Diebold and Yilmaz (2009) have proposed an alternative method to the GARCH framework to capture spill-overs of volatility shocks from one country to another, using a VAR and aggregating volatility spill-overs from multiple other countries' equity markets into a single index. A recent application to spill-lovers between currency and equity markets is Grobys (2015). In our study, we are concerned with "spill-over" effects of QE activity rather than spill-overs of volatility.…”