Asymmetric shocks, persistence in volatility and spillover effects between non ferrous metals on the LME spot market

Eric Martial Etoundi Atenga

MPRA Paper from University Library of Munich, Germany

Abstract: This paper employs a VAR(1)-GARCH(1,1) model to examine whether there is evidence of asymmetry shocks, persistence in volatility and spillover effects between three reference non-ferrous metal traded on the London Metal Exchange (Nickel, Lead and Copper) on the spot market using monthly data for the January 1980 to June 2013 period. This study illustrates dissymmetric effects on Nickel and Lead volatilities of bad and good news. Those non-ferrous metals reacted more actively to negative shocks as stocks markets. For return and volatility spillover, results show significant transmission among base metals. Regarding the return-generating process, past values of metal returns prices largely determined their current values at different levels and turning to the conditional variance equations, sensitivity to their past conditional volatility appears to be significant for the metal prices, implying that past variances returns increased current volatility of metal returns. We also find that past news from Nickel strongly affected the volatility behaviour of Copper and vice versa.

Keywords: Asymmetric shocks; Persistence; conditional volatility; Multivariate GARC; Spillover (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
Date: 2014-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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