International market links and volatility transmission

Valentina Corradi, Walter Distaso and Marcelo Fernandes

Journal of Econometrics, 2012, vol. 170, issue 1, 117-141

Abstract: This paper gauges volatility transmission between stock markets by testing conditional independence of their volatility measures. In particular, we check whether the conditional density of the volatility changes if we further condition on the volatility of another market. We employ nonparametric methods to estimate the conditional densities and model-free realized measures of volatility, allowing for both microstructure noise and jumps. We establish the asymptotic normality of the test statistic as well as the first-order validity of the bootstrap analog. Finally, we uncover significant volatility spillovers between the stock markets in China, Japan, UK and US.

Keywords: Conditional independence; Jump-diffusion; Noncausality; Quadratic variation; Realized variance (search for similar items in EconPapers)
JEL-codes: C14 G15 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:170:y:2012:i:1:p:117-141

DOI: 10.1016/j.jeconom.2012.03.003

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