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Asymmetric Volatility Spillovers between Stock Market and Real Activity: Evidence from UK and US

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Author Info
Nikolaos Giannellis () (Department of Economics, University of Crete, Greece)
Athanasios Papadopoulos () (Department of Economics, University of Crete, Greece)
Angelos Kanas () (Department of Economics, University of Crete, Greece)

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Abstract

By estimating bivariate EGARCH (2, 1) models, we find significant short run dynamic relations between stock market and real activity for the UK and the US over the period 1970-2002. There is evidence of significant reciprocal volatility spillovers between the two sectors within a country, implying stronger interdependencies in UK rather than in US. Volatility spillovers, transmitted via the balance sheet channel, are found to be asymmetric only in the case of UK. Namely, a negative shock in the stock market increases volatility in the real economy more than a positive shock.

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Publisher Info
Paper provided by University of Crete, Department of Economics in its series Working Papers with number 0807.

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Length: 17 pages
Date of creation: 20 Jun 2008
Date of revision:
Handle: RePEc:crt:wpaper:0807

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Related research
Keywords: Stock market; real activity; volatility spillovers; UK; US;

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

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  4. Nasseh, Alireza & Strauss, Jack, 2000. "Stock prices and domestic and international macroeconomic activity: a cointegration approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 40(2), pages 229-245. [Downloadable!] (restricted)
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  7. G. William Schwert, 1990. "Stock Returns and Real Activity: A Century of Evidence," NBER Working Papers 3296, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Koutmos, Gregory & Booth, G Geoffrey, 1995. "Asymmetric volatility transmission in international stock markets," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 747-762, December. [Downloadable!] (restricted)
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