Keywords
multivariate garch, asymmetry, volatility, spillovers, risk
Start Date
1-7-2004 12:00 AM
Abstract
The relationship between volatility and risk has been one of the main factors underlying the interest in volatility modelling. An important question for international diversification is whether shocks in one market influence, or have spillovers into, returns and volatility in other markets. This paper tests for the existence of volatility spillovers among the SandP 500, FTSE 100 and Nikkei 225 stock indexes using intra-daily data from 12/10/1992 to 7/7/2003. Existing work is extended through the application of the vector autoregressive moving average asymmetric generalised autoregressive conditional heteroskedasticity (VARMA-AGARCH) model of Chan, Hoti and McAleer (2002). The results suggest the presence of volatility spillovers from FTSE 100 to both SandP 500 and Nikkei 225, and from SandP 500 to FTSE 100.
Multivariate Volatility and Spillover Effects in Financial Markets
The relationship between volatility and risk has been one of the main factors underlying the interest in volatility modelling. An important question for international diversification is whether shocks in one market influence, or have spillovers into, returns and volatility in other markets. This paper tests for the existence of volatility spillovers among the SandP 500, FTSE 100 and Nikkei 225 stock indexes using intra-daily data from 12/10/1992 to 7/7/2003. Existing work is extended through the application of the vector autoregressive moving average asymmetric generalised autoregressive conditional heteroskedasticity (VARMA-AGARCH) model of Chan, Hoti and McAleer (2002). The results suggest the presence of volatility spillovers from FTSE 100 to both SandP 500 and Nikkei 225, and from SandP 500 to FTSE 100.
