Measuring Persistence in Volatility Spillovers

Christian Conrad and Enzo Weber

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: This paper analyzes volatility spillovers in multivariate GARCH-type models. We show that the cross-effects between the conditional variances determine the persistence of the transmitted volatility innovations. In particular, the influence of a foreign volatility innovation on a conditional variance is even more persistent than an own innovation unless this effect is offset by an according negative variance spillover of sufficient size. Moreover, ignoring the latter causes a downward bias in the estimate of the initial impact of foreign volatility innovations. Applying the concept to portfolios of small and large firms, we find that shocks to small firm returns affect the large firm conditional variance once we allow for (negative) spillovers between the conditional variances themselves.

JEL-codes: C32 C51 G10 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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https://www.econstor.eu/bitstream/10419/79850/1/VfS_2013_pid_585.pdf (application/pdf)

Related works:
Working Paper: Measuring Persistence in Volatility Spillovers (2013)
Working Paper: Measuring Persistence in Volatility Spillovers (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79850

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