Advanced Search
MyIDEAS: Login to save this paper or follow this series

Volatility Spillovers, Interdependence and Comovements: A Markov Switching Approach

Contents:

Author Info

Abstract

The transmission mechanisms of volatility between markets can be characterized within a new Markov Switching bivariate model where the state of one variable feeds into the transition probability of the state of the other. A number of model restrictions and hypotheses can be tested to stress the role of one market relative to another (spillover, interdependence, comovement, independence, Granger non causality). The model is estimated on the weekly high--low range of five Asian markets, assuming a central (but not necessarily dominant) role for Hong Kong. The results show plausible market characterizations over the long run with a spillover from Hong Kong to Korea and Thailand, interdependence with Malaysia and comovement with Singapore.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://local.disia.unifi.it/ricerca/pubblicazioni/working_papers/2007/wp2007_11.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti" in its series Econometrics Working Papers Archive with number wp2007_11.

as in new window
Length:
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:fir:econom:wp2007_11

Contact details of provider:
Postal: Viale G.B. Morgagni, 59 - I-50134 Firenze - Italy
Phone: +39 055 2751500
Fax: +39 055 4223560
Web page: http://www.disia.unifi.it/
More information through EDIRC

Related research

Keywords: Markov Switching; multiple chains; volatility; spillover effect; comovements.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Kim, C-J., 1991. "Dynamic Linear Models with Markov-Switching," Papers 91-8, York (Canada) - Department of Economics.
  2. Celso Brunetti & Roberto S. Mariano & Chiara Scotti & Augustine H. H. Tan, 2003. "Markov Switching Garch Models of Currency Crises in Southeast Asia," PIER Working Paper Archive 03-008, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Francis X. Diebold & Kamil Yilmaz, 2008. "Measuring financial asset return and volatility spillovers, with application to global equity markets," Working Papers 08-16, Federal Reserve Bank of Philadelphia.
  4. Bollerslev, Tim & Law, Tzuo Hann & Tauchen, George, 2008. "Risk, jumps, and diversification," Journal of Econometrics, Elsevier, vol. 144(1), pages 234-256, May.
  5. Frijns, Bart & Schotman, Peter C., 2006. "Nonlinear dynamics in Nasdaq dealer quotes," Computational Statistics & Data Analysis, Elsevier, vol. 51(4), pages 2246-2266, December.
  6. Edwards, Sebastian & Susmel, Raul, 2001. "Volatility dependence and contagion in emerging equity markets," Journal of Development Economics, Elsevier, vol. 66(2), pages 505-532, December.
  7. Edoardo Otranto, 2005. "The multi-chain Markov switching model," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 24(7), pages 523-537.
  8. Sebastian Edwards & Raul Susmel, 2003. "Interest-Rate Volatility in Emerging Markets," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 328-348, May.
  9. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
  10. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
  11. L. Baele, 2003. "Volatility Spillover Effects in European Equity Markets," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/189, Ghent University, Faculty of Economics and Business Administration.
  12. Carvalho, Carlos M. & Lopes, Hedibert F., 2007. "Simulation-based sequential analysis of Markov switching stochastic volatility models," Computational Statistics & Data Analysis, Elsevier, vol. 51(9), pages 4526-4542, May.
  13. Bulla, Jan & Bulla, Ingo, 2006. "Stylized facts of financial time series and hidden semi-Markov models," Computational Statistics & Data Analysis, Elsevier, vol. 51(4), pages 2192-2209, December.
  14. Marcello Pericoli & Massimo Sbracia, 2001. "A Primer on Financial Contagion," Temi di discussione (Economic working papers) 407, Bank of Italy, Economic Research and International Relations Area.
  15. Robert F. Engle & Takatoshi Ito & Wen-Ling Lin, 1988. "Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market," NBER Working Papers 2609, National Bureau of Economic Research, Inc.
  16. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  17. Hamilton, James D., 1986. "State-space models," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 50, pages 3039-3080 Elsevier.
  18. Monica Billio & Jacques Anas & Laurent Ferrara & Marco Lo Duca, 2007. "Business Cycle Analysis with Multivariate Markov Switching Models," Working Papers 2007_32, Department of Economics, University of Venice "Ca' Foscari".
  19. So, Mike K P & Lam, K & Li, W K, 1998. "A Stochastic Volatility Model with Markov Switching," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(2), pages 244-53, April.
  20. Andersen, Torben G & Bollerslev, Tim, 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 885-905, November.
  21. Hamilton, James D. & Susmel, Raul, 1994. "Autoregressive conditional heteroskedasticity and changes in regime," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 307-333.
  22. Geert Bekaert & Campbell R. Harvey, 2003. "Market Integration and Contagion," NBER Working Papers 9510, National Bureau of Economic Research, Inc.
  23. Garman, Mark B & Klass, Michael J, 1980. "On the Estimation of Security Price Volatilities from Historical Data," The Journal of Business, University of Chicago Press, vol. 53(1), pages 67-78, January.
  24. Parkinson, Michael, 1980. "The Extreme Value Method for Estimating the Variance of the Rate of Return," The Journal of Business, University of Chicago Press, vol. 53(1), pages 61-65, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fir:econom:wp2007_11. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francesco Calvori).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.