Macroeconomic shocks and volatility spillovers between stock, bond, gold and crude oil markets

Yongdeng Xu, Bo Guan, Wenna Lu and Saeed Heravi ()
Additional contact information
Bo Guan: Cardiff Business School
Wenna Lu: Cardiff Metropolitan University, Cardiff, United Kingdom
Saeed Heravi: Cardiff Business School

No E2024/15, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This paper introduces a novel model to analyse the impact of macroeconomic shocks on volatility spillovers within key financial markets, such as Stock, Bond, Gold and Crude Oil. By treating macroeconomic variables as external factors to financial market volatility, our study distinguishes between internal financial volatility spillovers and external shocks arising from macroeconomic changes. Our analysis reveals that without macroeconomic shocks, the Stock market predominantly acts as the main source of volatility spillovers, with Crude Oil being the principal spillover recipient. However, the Stock market’s role in driving volatility spillover, especially towards the Crude Oil market, changes markedly in the context of macroeconomic shocks. These shocks exert a more substantial impact on Crude Oil compared to other markets. In contrast, the Bond and Gold markets exhibit a lower level of volatility transmission and are less influenced by macroeconomic shocks, thereby reinforcing their roles as stabilizers within the financial system.

Keywords: Volatility spillover; Macroeconomic shocks; Multiplicative error model; Realized volatility; Financial markets (search for similar items in EconPapers)
JEL-codes: C32 C52 G14 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2024-07
New Economics Papers: this item is included in nep-ene
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Journal Article: Macroeconomic shocks and volatility spillovers between stock, bond, gold and crude oil markets (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2024/15

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