Better to give than to receive: Predictive directional measurement of volatility spillovers

Francis Diebold and Kamil Yilmaz ()

International Journal of Forecasting, 2012, vol. 28, issue 1, 57-66

Abstract: Using a generalized vector autoregressive framework in which forecast-error variance decompositions are invariant to the variable ordering, we propose measures of both the total and directional volatility spillovers. We use our methods to characterize daily volatility spillovers across US stock, bond, foreign exchange and commodities markets, from January 1999 to January 2010. We show that despite significant volatility fluctuations in all four markets during the sample, cross-market volatility spillovers were quite limited until the global financial crisis, which began in 2007. As the crisis intensified, so too did the volatility spillovers, with particularly important spillovers from the stock market to other markets taking place after the collapse of the Lehman Brothers in September 2008.

Keywords: Asset market; Asset return; Stock market; Market linkage; Financial crisis; Contagion; Vector autoregression; Variance decomposition (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2467)

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Working Paper: Better to Give than to Receive: Predictive Directional Measurement of Volatility Spillovers (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:28:y:2012:i:1:p:57-66

DOI: 10.1016/j.ijforecast.2011.02.006

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