Volatility spillovers between foreing-exchange and stock markets

Amalia Morales-Zumaquero () and Simon Sosvilla-Rivero
Additional contact information
Amalia Morales-Zumaquero: Department of Economic Theory and History, Universidad de Málaga. Instituto Complutense de Estudios Internacionales (ICEI). Universidad Complutense de Madrid.

No 1702, Working Papers del Instituto Complutense de Estudios Internacionales from Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales

Abstract: This paper empirically analyses the evidence of intra-spillovers and inter-spillovers between foreign exchange and stock markets in the seven economies which concentrate the majority of foreign exchange transactions (i.e. United Kingdom, Euro area, Australia, Swiss, Canada, United Kingdom and Japan), using daily data, during the period 1990 to 2015 and during the pre-global and post-global financial crisis periods. To that end, we employ two econometric methodologies: the C-GARCH methodology by Engle and Lee (1999) and the SVAR framework (Sohel Azad et al., 2015). Results suggest that: (i) permanent and transitory components of the conditional variance exhibit several well-known peaks in volatilities; (ii) the long-run volatility relationships are stronger than the short-run linkages volatility with a reinforcement during the post-global financial crisis period; (iii) the presence of intra-spillovers and inter-spillovers increases substantially during the post-global financial crisis period and (iv) in all samples, the stock markets play a dominant role in the transmission of long-run and short-run volatility, except for in the period after the Global Financial Crisis, where the foreign-exchange markets are the main long-run volatility triggers.

Keywords: Stock markets; Exchange rates; Market spillovers; Component-GARCH model; Longterm volatility; Short-term volatility (search for similar items in EconPapers)
Pages: 52 pages
Date: 2017
New Economics Papers: this item is included in nep-fmk
References: Add references at CitEc
Citations:

Downloads: (external link)
https://eprints.ucm.es/id/eprint/41371/1/WP%2002-17.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucm:wpaper:1702

Ordering information: This working paper can be ordered from
Instituto Complutense de Estudios Internacionales. Finca Mas Ferre Campus de Somosaguas 28223 Madrid

Access Statistics for this paper

More papers in Working Papers del Instituto Complutense de Estudios Internacionales from Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales Contact information at EDIRC.
Bibliographic data for series maintained by Águeda González Abad ().