Volatility spillovers among global stock markets: measuring total and directional effects

Abstract

In this study we construct volatility spillover indexes for some of the major stock market indexes in the world. We use a DCC-GARCH framework for modelling the multivariate relationships of volatility among markets. Extending the framework of Diebold and Yilmaz [2012] we compute spillover indexes directly from the series of returns considering the time-variant structure of their covariance matrices. Our spillover indexes use daily stock market data of Australia, Canada, China, Germany, Japan, the United Kingdom, and the United States, for the period January 2001 to August 2016. We obtain several relevant results. First, total spillovers exhibit substantial time-series variation, being higher in moments of market turbulence. Second, the net position of each country (transmitter or receiver) does not change during the sample period. However, their intensities exhibit important time-variation. Finally, transmission originates in the most developed markets, as expected. Of special relevance, even though the Chinese stock market has grown importantly over time, it is still a net receiver of volatility spillovers.

Bayesian inference in multivariate nonlinear state-space models

“…Overall, in the sample period, we are considering the US and the UK are the primary transmitters of the spillover effects, while Germany, China, and Japan are the primary receivers of the spillover effects. The results are as to be expected from other studies Gamba-Santamaria et al (2017). The US often appears to be a strong transmitter of the volatility spillovers while…”

“…Finally, when the estimation is improved it would be interesting from both methodological and applied points of view to extend the model and allow for time variation in both autoregressive matrix and correlation coefficients. It has been shown in the literature, for example, see Gamba-Santamaria et al (2017), that spillover effects can change over time. Note: This figure shows histograms for elements of the Φ matrix sampled with PMCMC, blue lines indicate zero point.…”

The Influence of Internet Finance on the Sustainable Development of the Financial Ecosystem in China

“…Different from previous literature [9,20,35], we studied the influence of internet finance ecological subject on the sustainable development of financial ecosystem from empirical perspectives. The risk transmission effect between the traditional financial ecological subjects has been studied [19], but the influence of internet finance on the financial ecosystem of the traditional financial industries has not been studied. We obtained the results by the GARCH-BEKK model.…”

“…Some studies discuss internet finance's influence on a single enterprise or traditional financial industry, and most of them focus on the influence on the banking industry [13,14], and rarely have researchers discussed the influence on other financial industries [15]. Although there are several studies on the spillover effect among the ecological subjects of traditional finance markets [16][17][18][19], there are only a few studies on the dynamic correlation and risk transmission effects between the ecological subjects of internet finance and traditional finance. Only Chen et al [20] used the conditional value at risk (CoVaR) to measure the degree of spillover when internet finance is in extreme risk.…”

Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods

“…Diebold and Yilmaz [49] performed a variance decomposition of the covariance matrix of the error terms from a reduced-form VAR model to investigate the spillover effect in the global equity market. More recently, Gamba-Santamaria et al [50] extended the framework and considered the time-varying feature in global volatility spillovers. Their research, although providing simple and intuitive methods for measuring directional linkages between global stock markets, may suffer from the limitation of the linear parametric modeling, as discussed above.…”