Structural breaks in volatility spillovers between international financial markets: Contagion or mere interdependence?

Interrelationship and Spillover Effect between Stock and Exchange Rate Markets in the Major Emerging Economies

“…PX, koruna, WIG, forint, RTS, SENSEX, rupee and USD). These results speak in favour of Ewing and Malik (2005), Huang (2012) and Jung and Maderitsch (2014) who claimed that spillover effect could be biased if structural shifts are not recognized in the models. On the other hand, the volatility spillover effect is much more modest in regard to the shock transmission effect in all countries, but the overall pattern remains, i.e.…”

“…Hillebrand (2005), Kramer and Azamo (2007) in particular asserted that volatility persistence might be overestimated and heavily inclined towards one if deterministic regime shifts are ignored in GARCH models. Some papers as Ewing and Malik (2005), Huang (2012), and Jung and Maderitsch (2014) documented that volatility spillover effect could be biased if structural shifts are not recognized in the models. In addition, Miralles-Marcelo et al (2008) found that asymmetric effect in the GARCH framework could be wrongly assessed if structural breaks are not taken into account.…”

The Nature of Volatility Spillovers Across the International Capital Markets

“…As far as the volatility process is concerned, I assume that t follows a VAR model as indicated in equation (1). This volatility modeling is not new in the financial literature since similar approaches have been previously considered (see Diebold and Yilmaz (2014), Diebold and Yilmaz (2012), Diebold and Yilmaz (2009), Diebold and Yilmaz (2015), Barigozzi and Brownlees (2016), Jung and Maderitsch (2014), Andersen et al (2003)). Additionally, I measure the volatility of country i in period t, it , by applying a range-based volatility estimator to the data on the corresponding ETF, following Garman and Klass (1980).…”

“…King and Wadhwani (1990), Hamao, Masulis, and Ng (1990), Lin, Engle, and Ito (1994)). Despite the fundamental importance of the issue, studies specifically concerned with the transmission of volatility among a large panel of countries have not received as much attention until recently (Jung and Maderitsch (2014), Diebold and Yilmaz (2014), Diebold and Yilmaz (2009), Diebold and Yilmaz (2012)). The current study contributes to this latter strand of the literature by uncovering the detailed patterns of volatility spillovers among a panel of countries that jointly represent more than 80% of the worldwide market capitalization.…”

Regime Switching Vine Copula Models for Global Equity and Volatility Indices

“…As shown by the financial crisis back in 2007/2008 or the very recent sell-off in global equity markets in early 2016, major shifts in market sentiment are often not restricted to some area of the world but seem to quickly spread globally. Various researchers (as [18][19][20][21][22][23]) discussed in the past that, for such structural breaks within the dependencies between equity markets, (implied) volatility might play an important role, as well.…”