Conditional Time-Varying General Dynamic Factor Models and Its Application to the Measurement of Volatility Spillovers across Russian Assets

Vladimir Balash, Alexey Faizliev, Sergei Sidorov and Elena Chistopolskaya
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Vladimir Balash: Faculty of Mathematics and Mechanics, Saratov State University, 410012 Saratov, Russia
Alexey Faizliev: Faculty of Mathematics and Mechanics, Saratov State University, 410012 Saratov, Russia
Sergei Sidorov: Faculty of Mathematics and Mechanics, Saratov State University, 410012 Saratov, Russia
Elena Chistopolskaya: Faculty of Economics, Saratov State University, 410012 Saratov, Russia
Authors registered in the RePEc Author Service: Владимир Алексеевич Балаш

Mathematics, 2021, vol. 9, issue 19, 1-31

Abstract: This study analyzes the spillover effects of volatility in the Russian stock market. The paper applies the Diebold–Yilmaz connectedness methodology to characterize volatility spillovers between Russian assets. The spectral representation of the forecast variance decomposition proposed by Baruník and K?ehlik is used to describe the connectivity in short-term (up to 5 days), medium-term (6–20 days) and long-term (more than 20 days) time frequencies. Additionally, two new augmented models are developed and applied to evaluate conditional spillover effects in different sectors of the Russian economy for the period from January 2012 to June 2021. It is shown that spillover effects increase significantly during political and economic crises and decrease during periods of relative stability. The rising of the overall level of spillovers in the Russian stock market coincides in time with the political crisis of 2014, the intensification of anti-Russian sanctions in 2018 and the fall in oil prices and the start of the pandemic in 2020. With the consideration of the augmented models it can be argued that a significant part of the long-term spillover effects on the Russian stock market may be caused by the influence of external economic and political factors. However, volatility spillovers generated by internal Russian idiosyncratic shocks are short-term. Thus, the proposed approach provides new information on the impact of external factors on volatility spillovers in the Russian stock market.

Keywords: stock markets; spillovers; conditional volatility spillovers; risk modelling; volatility models; graph; time series analysis; market networks (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:9:y:2021:i:19:p:2484-:d:649723

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