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On detection of volatility spillovers in overlapping stock markets

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  • Kohonen, Anssi

Abstract

This paper applies a recently proposed structural vector autoregressive model identification method to an established, previously unidentified theoretical model of stock market volatility spillovers. The structural model is identified and can be estimated with the method of maximum likelihood. Volatility spillovers can then be tested with the standard likelihood ratio test. This way our test, unlike the majority of the existing volatility spillover tests, has its foundations firmly in the economic theory. Our test is developed for fully overlapping stock markets. The empirical application of the paper considers stock markets of the eurozone in the years 2010–2011. Evidence of volatility spillovers is found.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 22 (2013)
Issue (Month): C ()
Pages: 140-158

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Handle: RePEc:eee:empfin:v:22:y:2013:i:c:p:140-158

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Web page: http://www.elsevier.com/locate/jempfin

Related research

Keywords: Volatility spillovers; Contagion; SVAR identification; Hypothesis testing; Stock markets; Euro debt crisis;

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