Risk Transmission and Contagion in the Equity Markets: International Evidence from the Global Financial Crisis

Hatice Gaye Gencer () and Mehmet Yasin Hurata
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Hatice Gaye Gencer: Department of Business Administration, Faculty of Economics and Administrative Sciences, Yeditepe University, Turkey. Corresponding author.
Mehmet Yasin Hurata: Department of Business Administration, Faculty of Economics and Administrative Sciences, Yeditepe University, Turkey

Journal for Economic Forecasting, 2017, issue 3, 110-129

Abstract: This study examines the time-varying volatility spillover mechanisms between the US (S&P 500) and the world’s largest stock markets, including those of the G20 countries, along with some selected European equity exchanges between 1994 and 2014. In the context of the empirical study, we adopt a multivariate BEKK-GARCH model with its asymmetric generalization. Overall, our results suggest that there is a significant shock and volatility transmission from the S&P 500 to the other stock markets while the opposite (from the others to the US) is also observed for some market-pairs under investigation. Furthermore, we analyze whether market volatilities and time-varying correlations significantly change during the different phases of the 2007-2009 global financial crisis or not. The linear regression analyses with the dummy indicators suggest heightened variances and correlations, which signifies the crisis spillover and contagion.

Keywords: volatility spillover; shock transmission; contagion; emerging markets; ABEKKGARCH model (search for similar items in EconPapers)
JEL-codes: G01 G11 G15 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2017:i:3:p:110-129

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