Risk spillovers between S&P500, green bond, real estate, oil markets and dollar index

Soheil Roudari

MPRA Paper from University Library of Munich, Germany

Abstract: In the finance world, one of the fundamental concept is portfolio optimization and diversification. Usually, Investors apply the risk and return approach to diversify their portfolio, but risk spillovers and connectedness between different markets should be incorporated in investment decision-making as well, especially during crisis periods. This study measures risk spillovers and connectedness between S&P500 index, green bond, real estate, oil markets and dollar index in the USA using the TVP-VAR- Diebold- Yilmaz (2012) model from 2016 to November of 2022. TVP-VAR model is considered as time varying model, which can incorporate political and economy events and conditions, therefore, investors can make an insightful decisions regarding their portfolios. The results show that the S&P500 index and real estate market are two main drivers of volatility in the system compared to other markets. Not only do they transmit more volatility, but they also receive more of it in comparison to others. After 2020, the level of the S&P500 index and real estate market volatility increases significantly, possibly due to the Covid-19 pandemic. Furthermore, as expected, the green bond market receives spillovers from others, however, it does not transmit.

Keywords: Risk spillovers; S&P500 index; green bond; real estate; oil; dollar index (search for similar items in EconPapers)
JEL-codes: C58 F31 G11 (search for similar items in EconPapers)
Date: 2023-03-08
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