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On bank return and volatility spillovers: Identifying transmitters and receivers during crisis periods

George Apostolakis, Christos Floros and Nikolaos Giannellis

International Review of Economics & Finance, 2022, vol. 82, issue C, 156-176

Abstract: This study investigates dynamic bank-return correlation and spillovers among G7 advanced markets, employing an asymmetric multivariate GARCH approach and the forecast-error variance decomposition framework of a generalized VAR model and using a time-varying parameter autoregressive model. We utilize weekly bank stock indices over a long period (2000–2020) covering the recent Global Financial Crisis (GFC) and the subsequent European Sovereign Debt Crisis (ESDC). Dynamic spillover analysis reveals evidence of contagion effects during recent episodes. It is also shown that the impact of the GFC is notably higher than that of the ESDC. Major spillover transmitters are the markets of France, Germany and the UK, with the US market being vulnerable to shocks from European markets. Useful implications arise for policy makers and investors.

Keywords: DCC; TVP-VAR; Return spillovers; Bank volatility; Financial crises; Connectedness; Contagion; Asymmetries; GJR (search for similar items in EconPapers)
JEL-codes: G01 G11 G15 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.iref.2022.06.009

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