Measuring Financial Asset Return and Volatility Spillovers, With Application to Global Equity Markets
We provide a simple and intuitive measure of interdependence of asset returns and/or volatilities. In particular, we formulate and examine precise and separate measures of return spillovers and volatility spillovers. Our framework facilitates study of both non-crisis and crisis episodes, including trends and bursts in spillovers, and both turn out to be empirically important. In particular, in an analysis of nineteen global equity markets from the early 1990s to the present, we find striking evidence of divergent behavior in the dynamics of return spillovers vs. volatility spillovers: Return spillovers display a gently increasing trend but no bursts, whereas volatility spillovers display no trend but clear bursts.
For helpful comments we thank the Editor and two referees, Jon Faust, Roberto Rigobon Harald Uhlig, and the organizers and participants at the 2006 NBER International Seminar on Macroeconomics in Tallinn, Estonia, especially Michael Binder, Kathryn Dominguez, Jeff Frankel, Francesco Giavazzi, Eric Leeper, Lucrezia Reichlin and Ken West. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
FrancisX. Diebold & Kamil Yilmaz, 2009. "Measuring Financial Asset Return and Volatility Spillovers, with Application to Global Equity Markets," Economic Journal, Royal Economic Society, vol. 119(534), pages 158-171, 01. citation courtesy of