Dynamic behaviors and contributing factors of volatility spillovers across G7 stock markets

Xianfang Su

The North American Journal of Economics and Finance, 2020, vol. 53, issue C

Abstract: This paper investigates the evolutions and determinants of volatility spillover dynamics in G7 stock markets in a time-frequency framework. We decompose volatility spillovers into short-, medium-, and long-term components, using a spectral representation of variance decompositions. The impacts of hypothesized factors on the decomposed volatility spillovers are also examined, using a linear regression model and fixed effects panel model. We find that the volatility spillovers across G7 stock markets are crisis-sensitive and are, in fact, closer to a memory-less process. The low-frequency components are the main contributors to the volatility spillovers; the high-frequency components are very sensitive to market event shocks. Moreover, our results reveal that the contributing factors have different effects on short-, medium-, and long-term volatility spillovers. There is no systematic pattern of the impacts of the contributing factors on volatility spillovers. However, whether the country is the transmitter or recipient of volatility spillovers could be a potential reason.

Keywords: Stock market; Volatility spillover; Time-frequency dynamics; Macroeconomic fundamentals; Sentiment factors (search for similar items in EconPapers)
JEL-codes: C13 G10 G15 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:53:y:2020:i:c:s1062940820301157

DOI: 10.1016/j.najef.2020.101218

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