Intra-daily volatility spillovers between the US and German stock markets

Vasyl Golosnoy, Bastian Gribisch and Roman Liesenfeld

No 2012-06, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: Using a novel three-phase model based upon a conditional autoregressive Wishart (CAW) framework for the realized (co)variances of the US Dow Jones and the German stock index DAX, we analyze intra-daily volatility spillovers between the US and German stock markets. The proposed model explicitly accounts for three distinct intraday periods resulting from the non-synchronous and partially overlapping opening hours of the two markets. We find evidence of significant short-term volatility spillovers from one intraday period to the next within both markets ('heat-wave effects') as well as across the two markets ('meteor-shower effects'). Furthermore, we find that during the subprime crisis the general persistence of short-term volatility shocks is considerably higher and the spillovers effects between the US and the German stock markets are significantly larger than before the crisis, indicating substantial volatility contagion effects.

Keywords: Conditional autoregressive Wishart model; Impulse response analysis; Observationdriven models; Realized covariance matrix; Subprime crisis (search for similar items in EconPapers)
JEL-codes: C32 C58 G17 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:201206

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