Volatility transmission across currencies and stock markets: GIIPS in crisis

Andreas Andrikopoulos, Aristeidis Samitas and Konstantinos Kougepsakis

Applied Financial Economics, 2014, vol. 24, issue 19, 1261-1283

Abstract: This article explores the structure of the volatility transmission mechanism between stock and currency markets for Eurozone economies with systemic fiscal problems such as Greece, Italy, Ireland, Portugal and Spain. We focus on the structural properties of volatility diffusion, in times of market instability, illiquidity, fiscal crisis as well as political uneasiness. Our evidence indicates the presence of bidirectional, asymmetric volatility spillovers between currency and stock markets. Our empirical findings bear significant implications for the allocation of money and capital in diversified investment choices, in a global marketplace of erratic restructurings and systemic instability.

Date: 2014
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DOI: 10.1080/09603107.2014.925054

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