Spreading of cross-market volatility information: Evidence from multiplex network analysis of volatility spillovers
Jue Gong,
Gang-Jin Wang,
Yang Zhou,
You Zhu,
Chi Xie and
Matteo Foglia
Journal of International Financial Markets, Institutions and Money, 2023, vol. 83, issue C
Abstract:
We propose a multiplex network including layers of realized variance (RV), implied variance (IV), and variance risk premium (VRP) to investigate the volatility information transmission among 18 global financial markets through the spillover index in the variance decomposition framework. We innovatively study the connectedness of global volatility from aspects of RV, IV, and VRP to portray the interrelation between market volatility and investor sentiments. Upon inspecting and comparing static and dynamic topological characteristics on each layer, we find that information transmission mechanism is different among the three layers. Spillover effects are observed to be the strongest on the IV layer in the long term, while the most evident spillover shocks are observed on the VRP layer in the short term. At the market level, European and the US markets are the main spillover emitters, while Asian markets primarily are spillover recipients. Our study provides valuable insights on global risk management and prevention for portfolio managers and policy makers.
Keywords: Volatility spillover; Multiplex network; Information transmission; Investor sentiment; Variance risk premium (search for similar items in EconPapers)
JEL-codes: F65 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S104244312300001X
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:83:y:2023:i:c:s104244312300001x
DOI: 10.1016/j.intfin.2023.101733
Access Statistics for this article
Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely
More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().