Volatility Connectedness of Bank Stocks Across the Atlantic

Kamil Yilmaz ()

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: This paper presents an analysis of the dynamic measures of volatility connectedness of major bank stocks in the US and the EU member countries. The results show that in the early stages of the US financial crisis in 2007 and 2008, the direction of the volatility connectedness was from the US banks towards the EU banks. However, once the financial crisis became global in the last quarter of 2008, volatility connectedness became bi-directional. The surge in volatility connectedness from the EU banks to the US banks in June 2011 was unprecedented, reflecting the scale of deterioration in the state of the EU banks. Finally, the within-connectedness of the US banks fluctuated throughout our sample period, while the within-connectedness of the EU banks increased steadily since 2007, a reflection of the fact that the European debt and banking crisis has not ended yet.

Keywords: Risk measurement; systemic risk; connectedness; systemically important financial institutions; vector autoregression; variance decomposition (search for similar items in EconPapers)
JEL-codes: C3 G2 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2014-02
New Economics Papers: this item is included in nep-acc, nep-ban and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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