Stock Market Volatility Spillovers: Evidence for Latin America

Santiago Gamba (), Jose Gomez-Gonzalez, Luis Melo-Velandia and Jorge Luis Hurtado-Guarin ()
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Jorge Luis Hurtado-Guarin: Banco de la República de Colombia

Borradores de Economia from Banco de la Republica de Colombia

Abstract: We extend the framework of Diebold and Yilmaz [2009] and Diebold and Yilmaz [2012] and construct volatility spillover indexes using a DCC-GARCH framework to model the multivariate relationships of volatility among assets. We compute spillover indexes directly from the series of asset returns and recognize the time-variant nature of the covariance matrix. Our approach allows for a better understanding of the movements of financial returns within a framework of volatility spillovers. We apply our method to stock market indexes of the United States and four Latin American countries. Our results show that Brazil is a net volatility transmitter for most of the sample period, while Chile, Colombia and Mexico are net receivers. The total spillover index is substantially higher between 2008Q3 and 2012Q2, and shock transmission from the United States to Latin America substantially increased around the Lehman Brothers’ episode.

Keywords: Volatility spillovers; DCC-GARCH model; Stock market linkages; financial crisis (search for similar items in EconPapers)
JEL-codes: C32 G01 G15 (search for similar items in EconPapers)
Pages: 14
Date: 2016-05
New Economics Papers: this item is included in nep-fmk, nep-lam, nep-net and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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https://doi.org/10.32468/be.943 (application/pdf)

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Journal Article: Stock market volatility spillovers: Evidence for Latin America (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:943

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