Measuring spot variance spillovers when (co)variances are time-varying - the case of multivariate GARCH models

Matthias Fengler and Helmut Herwartz

MPRA Paper from University Library of Munich, Germany

Abstract: We propose global and disaggregated spillover indices that allow us to assess variance and covariance spillovers, locally in time and conditionally on time-t information. Key to our approach is the vector moving average representation of the half-vectorized `squared' multivariate GARCH process of the popular BEKK model. In an empirical application to a four-dimensional system of broad asset classes (equity, fixed income, foreign exchange and commodities), we illustrate the new spillover indices at various levels of (dis)aggregation. Moreover, we demonstrate that they are informative of the value-at-risk violations of portfolios composed of the considered asset classes.

Keywords: BEKK model; forecast error variance decomposition; multivariate GARCH; spillover index; value-at-risk; variance spillovers (search for similar items in EconPapers)
JEL-codes: C32 C58 F3 G1 (search for similar items in EconPapers)
Date: 2015-03-17, Revised 2016-06-10
New Economics Papers: this item is included in nep-ets and nep-ore
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Related works:
Working Paper: Measuring spot variance spillovers when (co)variances are time-varying – the case of multivariate GARCH models (2015)
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