Return and volatility spillovers across the Western and MENA countries

Hamidreza Habibi () and Hassan Mohammadi

The North American Journal of Economics and Finance, 2022, vol. 60, issue C

Abstract: We use weekly data on returns and range-based volatility over 2005–2017 to examine the degree of interconnectedness in financial markets of eleven MENA and four Western economies using the methodology proposed by Diebold and Yilmaz (2009, 2012, 2014). Our findings suggest (a) similar patterns of dynamic spillovers in both returns and in volatility. Both return and volatility spillover indices experienced significant bursts from 2008 to 2011 coinciding with the U.S. financial crisis. (b) Financial markets of Israel, Saudi Arabia and the UAE are more closely integrated with Westerns markets and may serve as primary channels for transmission of Western shocks to the region. Also, shocks to these three markets have noticeable impacts on other MENA markets. (c) Shocks to the U.S. financial markets play a critical role in return and volatility of MENA markets. (d) These findings are robust to alterations in window size and forecast horizon.

Keywords: Financial contagion; Return spillovers; Volatility spillovers (search for similar items in EconPapers)
JEL-codes: F15 F36 G15 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:60:y:2022:i:c:s1062940822000031

DOI: 10.1016/j.najef.2022.101642

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