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Good and bad volatility spillovers: An asymmetric connectedness

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  • BenSaïda, Ahmed

Abstract

This paper analyzes the asymmetric volatility spillovers across major financial markets. The good and bad volatility components are relative to positive and negative shocks, respectively. The proposed framework adds a great deal of information by separating the effects of good news and bad news on risk transmission, and by detecting the time variation in the asymmetric connectedness. Empirical evidence on the G7 stock market indices shows that the good and bad volatilities are transmitted with different time-varying intensities. Specifically, during the global financial crisis and the European sovereign debt crisis, the markets transmit, on average, more bad volatility than good volatility.

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  • BenSaïda, Ahmed, 2019. "Good and bad volatility spillovers: An asymmetric connectedness," Journal of Financial Markets, Elsevier, vol. 43(C), pages 78-95.
    • Handle: RePEc:eee:finmar:v:43:y:2019:i:c:p:78-95
    DOI: 10.1016/j.finmar.2018.12.005
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    More about this item

    Keywords

    Asymmetric volatility; Contemporaneous spillovers; Financial contagion; Risk transmission;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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