Spillover of fear: Evidence from the stock markets of five developed countries

Tsai, I‐Chun

doi:10.1016/j.irfa.2014.03.007

Cited by 92 publications

(67 citation statements)

References 24 publications

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“…This framework has been widely employed in recent years to examine the international information transmission mechanisms across stock markets (Balli et al, 2015;Tsai, 2014;Yarovaya et al, 2016). However, to the best of our knowledge, there is no study that explores the dynamic interactions between Islamic and conventional equity markets, while including a number of major global economic and financial factors as well, within the framework of the spillover index methodology of Diebold and Yilmaz (2012).…”

Section: Literature Reviewmentioning

confidence: 99%

Risk transmission between Islamic and conventional stock markets: A return and volatility spillover analysis

Shahzad

Ferrer

Ballester

et al. 2017

International Review of Financial Analysis

163

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Abstract. This paper contributes to the current debate on the empirical validity of the decoupling hypothesis of the Islamic stock market from its mainstream counterparts by examining return and volatility spillovers across the global Islamic stock market, three main conventional national stock markets (the US, the UK and Japan) and a number of influential macroeconomic and financial variables over the period from July 1996 to June 2016. To that end, the VAR-based spillover index approach based on the generalized VAR framework developed by Diebold and Yilmaz (2012) is applied. The empirical analysis shows strong interactions in return and volatility among the global Islamic stock market, the conventional stock markets and the set of major risk factors considered. This finding means that the Islamic equity universe does not constitute a viable alternative for investors who wish to hedge their investments against the vagaries of stock markets, but it is exposed to the same global factors and risks hitting the conventional financial system. Therefore, this evidence leads to the rejection of the decoupling hypothesis of the Islamic stock market from conventional stock markets, which has significant implications for faith-based investors and policy makers in terms of portfolio diversification, hedging strategies and contagion risk.Keywords: Islamic stock market, conventional stock markets, global risk factors, return and volatility spillovers, spillover index approach JEL Classification: C58, G01, G15

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Section: Literature Reviewmentioning

confidence: 99%

Risk transmission between Islamic and conventional stock markets: A return and volatility spillover analysis

Shahzad

Ferrer

Ballester

et al. 2017

International Review of Financial Analysis

163

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“…Daily 10-year sovereign yields in EMU countries and rolling total connectedness. 8 Awartania et al (2013), Lee and Chang (2013), Chau and Deesomsak (2014) and Cronin (2014) apply this methodology to examine spillovers in the United States' markets; Yilmaz (2010), Zhou et al (2012) or Narayan et al (2014) focus on Asian countries; Apostolakisa and Papadopoulos (2014) and Tsai (2014) examine G-7 economies, and Duncan and Kabundi (2013) centre their analysis on South African markets. is a crisis-sensitive variable which can induce ''volatility surprise" (see Engle, 1993), by measuring and analysing the dynamic connectedness in volatility we will be able to examine the ''fear of connectedness" expressed by market participants as they trade.…”

Section: Introductionmentioning

confidence: 99%

Using connectedness analysis to assess financial stress transmission in EMU sovereign bond market volatility

Rodríguez

Gómez‐Puig

Sosvilla‐Rivero

2016

Journal of International Financial Markets, Institutions and Mo

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a b s t r a c tWe measure the connectedness in EMU sovereign market volatility between April 1999 and January 2014, monitoring stress transmission and identifing episodes of intensive spillovers from one country to the others. We first perform a static and dynamic analysis to measure the total volatility connectedness in the entire period using a framework recently proposed by Diebold and Yilmaz (2014). Second, we use a dynamic analysis to evaluate the net directional connectedness for each country and apply panel model techniques to investigate its determinants. Finally, we examine the time-varying behaviour of net pair-wise directional connectedness at different stages of the recent sovereign debt crisis.

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“…3 Awartania et al, (2013), Lee and Chang (2013), Chau and Deesomsak (2014) or Cronin (2014) apply this methodology to examine spillovers in the United States markets; Yilmaz (2010), Zhou et al (2012) or Narayan et al (2014) focus their analysis on Asian countries; Apostolakisa and Papadopoulos (2014) and Tsai (2014) examine G-7 economies; whilst Duncan and Kabundi (2013) center their analysis on South African markets.…”

Section: Introductionmentioning

confidence: 99%

Volatility spillovers in EMU sovereign bond markets

Rodríguez

Gómez‐Puig

Sosvilla‐Rivero

2015

International Review of Economics & Finance

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AbstractsWe analyse volatility spillovers in EMU sovereign bond markets. First, we examine the unconditional patterns during the full sample (April 1999-January 2014) using a measure recently proposed by Diebold and Yılmaz (2012). Second, we make use of a dynamic analysis to evaluate net directional volatility spillovers for each of the eleven countries under study, and to determine whether core and peripheral markets present differences. Finally, we apply a panel analysis to empirically investigate the determinants of net directional spillovers of this kind.

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Spillover of fear: Evidence from the stock markets of five developed countries

Cited by 92 publications

References 24 publications

Risk transmission between Islamic and conventional stock markets: A return and volatility spillover analysis

Risk transmission between Islamic and conventional stock markets: A return and volatility spillover analysis

Using connectedness analysis to assess financial stress transmission in EMU sovereign bond market volatility

Volatility spillovers in EMU sovereign bond markets

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