Stock markets volatility spillovers during financial crises: A DCC-MGARCH with skewed-t density approach
This paper investigates stock returns volatility spillovers in emerging and developed markets (DMs) using multivariate-GARCH (MGARCH) models and their variants. In addition, we analyse the impacts of global financial crisis (2007–2009) on stock market volatility interactions and modify the BEKK-MGAR...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2017-03-01
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| Series: | Borsa Istanbul Review |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2214845016301582 |
| _version_ | 1811203104853458944 |
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| author | Dahiru A. Bala Taro Takimoto |
| author_facet | Dahiru A. Bala Taro Takimoto |
| author_sort | Dahiru A. Bala |
| collection | DOAJ |
| description | This paper investigates stock returns volatility spillovers in emerging and developed markets (DMs) using multivariate-GARCH (MGARCH) models and their variants. In addition, we analyse the impacts of global financial crisis (2007–2009) on stock market volatility interactions and modify the BEKK-MGARCH-type models by including financial crisis dummies to assess their impact on volatilities and spillovers. Major findings reveal that correlations among emerging markets (EMs) are lower compared with correlations among DMs and increase during financial crises. Furthermore, we detect evidence of volatility spillovers and observe that own-volatility spillovers are higher than cross-volatility spillovers for EMs suggesting that shocks have not been substantially transmitted among EMs compared to DMs. We also find significant asymmetric behaviour in DMs while weak evidence is detected for EMs. Finally, the DCC-with-skewed-t density model provided improved diagnostics compared to other models partly due to its taking into account fat tails and skewed features often present in financial returns. |
| first_indexed | 2024-04-12T02:49:09Z |
| format | Article |
| id | doaj.art-eb36a430194a4b6dac216788fbe9c24f |
| institution | Directory Open Access Journal |
| issn | 2214-8450 |
| language | English |
| last_indexed | 2024-04-12T02:49:09Z |
| publishDate | 2017-03-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Borsa Istanbul Review |
| spelling | doaj.art-eb36a430194a4b6dac216788fbe9c24f2022-12-22T03:51:03ZengElsevierBorsa Istanbul Review2214-84502017-03-01171254810.1016/j.bir.2017.02.002Stock markets volatility spillovers during financial crises: A DCC-MGARCH with skewed-t density approachDahiru A. Bala0Taro Takimoto1Federal Inland Revenue Service (FIRS), No. 20 Sokode Crescent, Zone 5, Wuse, Abuja, FCT, NigeriaGraduate School of Economics, Department of Economic Engineering, Kyushu University, 6-19-1 Hakozaki, Higashi-ku, 812-8581, Fukuoka City, JapanThis paper investigates stock returns volatility spillovers in emerging and developed markets (DMs) using multivariate-GARCH (MGARCH) models and their variants. In addition, we analyse the impacts of global financial crisis (2007–2009) on stock market volatility interactions and modify the BEKK-MGARCH-type models by including financial crisis dummies to assess their impact on volatilities and spillovers. Major findings reveal that correlations among emerging markets (EMs) are lower compared with correlations among DMs and increase during financial crises. Furthermore, we detect evidence of volatility spillovers and observe that own-volatility spillovers are higher than cross-volatility spillovers for EMs suggesting that shocks have not been substantially transmitted among EMs compared to DMs. We also find significant asymmetric behaviour in DMs while weak evidence is detected for EMs. Finally, the DCC-with-skewed-t density model provided improved diagnostics compared to other models partly due to its taking into account fat tails and skewed features often present in financial returns.http://www.sciencedirect.com/science/article/pii/S2214845016301582Stock markets volatilityCCC-MGARCHSpilloverBEKK-MGARCHDCC-with-skewed-tFinancial crises |
| spellingShingle | Dahiru A. Bala Taro Takimoto Stock markets volatility spillovers during financial crises: A DCC-MGARCH with skewed-t density approach Borsa Istanbul Review Stock markets volatility CCC-MGARCH Spillover BEKK-MGARCH DCC-with-skewed-t Financial crises |
| title | Stock markets volatility spillovers during financial crises: A DCC-MGARCH with skewed-t density approach |
| title_full | Stock markets volatility spillovers during financial crises: A DCC-MGARCH with skewed-t density approach |
| title_fullStr | Stock markets volatility spillovers during financial crises: A DCC-MGARCH with skewed-t density approach |
| title_full_unstemmed | Stock markets volatility spillovers during financial crises: A DCC-MGARCH with skewed-t density approach |
| title_short | Stock markets volatility spillovers during financial crises: A DCC-MGARCH with skewed-t density approach |
| title_sort | stock markets volatility spillovers during financial crises a dcc mgarch with skewed t density approach |
| topic | Stock markets volatility CCC-MGARCH Spillover BEKK-MGARCH DCC-with-skewed-t Financial crises |
| url | http://www.sciencedirect.com/science/article/pii/S2214845016301582 |
| work_keys_str_mv | AT dahiruabala stockmarketsvolatilityspilloversduringfinancialcrisesadccmgarchwithskewedtdensityapproach AT tarotakimoto stockmarketsvolatilityspilloversduringfinancialcrisesadccmgarchwithskewedtdensityapproach |