Do volatility spillover effects vary across stock market crashes? An empirical analysis

Lamia Kalai

Afro-Asian Journal of Finance and Accounting, 2025, vol. 15, issue 4, 459-490

Abstract: The aim of this paper is to compare the volatility of nine developed and emerging stock markets, with the US market during the 2005-2021 period. We use the ICSS algorithm to detect a change point of a stationary structure in a time series and we consider a dynamic conditional correlation specification to model the time-varying feature of volatility. Our findings make two interesting contributions to the relevant literature: first, we show significant bidirectional volatility spillover between the USA and equity markets during crises; second, the study of dynamic relationships between stock markets shows contagion effects only in periods of high volatility: the impact of shocks from the US market is more substantial during the post-crisis period. Finally, the empirical analysis shows evidence of transmission effects of volatility shocks. Market adjustment processes require regulatory and supervisory government measures that can prevent a systemic crisis.

Keywords: market crashes; ICSS algorithm; breakpoints analysis; multivariate GARCH; conditional correlation; volatility spillover. (search for similar items in EconPapers)
Date: 2025
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