Subprime crisis and volatility spillover

Mouna Abdelhedi-Zouch, Mouna Boujelbene Abbes and Younes Boujelbene

International Journal of Monetary Economics and Finance, 2011, vol. 4, issue 1, 1-20

Abstract: The subprime financial crisis has sparked our interest in identifying channels through which US crisis spread across 20 developed and emerging stock markets. Empirical results of GARCH and EGARCH estimated models show a high persistence and asymmetric effect of volatility. Estimation of an augmented GARCH model indicates that the US current crisis spilled over American, European, Asian and Arabic financial markets. Interestingly, there are significant spillovers of volatility to Asian markets from UK and Swiss. Financial markets of Japan, Korea and especially Singapore constitute a channel through which crises are transmitted across global equity return.

Keywords: subprime crisis; volatility persistence; asymmetric effect; volatility spillover; developed markets; emerging markets; EGARH model; augmented GARCH model; financial crisis; stock markets. (search for similar items in EconPapers)
Date: 2011
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