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The joint spillover index

William Lastrapes () and Thomas Wiesen

Economic Modelling, 2021, vol. 94, issue C, 681-691

Abstract: We propose an alternative measure of system-wide connectedness to the popular generalized spillover index, based on generalized forecast error variance decompositions, of Diebold and Yilmaz (2012, 2014). Our measure relies on joint conditional forecasts to decompose variance, as opposed to the popular method's reliance on single-variable conditioning sets, and is a more precise measure of aggregate spillovers. We show in an application to US industry sector stock returns that the difference between the two measures can be substantial.

Keywords: Connectedness; Industry sectors; Market integration; Variance decomposition (search for similar items in EconPapers)
JEL-codes: C32 C4 G1 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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DOI: 10.1016/j.econmod.2020.02.010

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