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Volatility-Spillover E ffects in European Bond Markets

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Abstract

We analyze volatility spillover from the US and aggregate European bond markets into individual European bond markets using a GARCH volatility-spillover model. We find strong statistical evidence of volatility-spillover e ffects from both the US and Europe into the individual bond markets.For the EMU countries,the US volatility-spillover effects are rather weak whereas the European volatility-spillover effects are strong.The opposite applies to the non-EMU countries.Pure local volatility e ffects are substantial. The introduction of the euro has strengthened the European volatility-spillover effects for the EMU countries.The non-EMU countries are unaffected hereby.

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Bibliographic Info

Paper provided by University of Aarhus, Aarhus School of Business, Department of Business Studies in its series Finance Working Papers with number 03-8.

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Length: 38 pages
Date of creation: 01 Oct 2003
Date of revision:
Handle: RePEc:hhb:aarfin:2003_008

Note: 2nd version
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Postal: The Aarhus School of Business, Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark
Fax: + 45 86 15 19 43
Web page: http://www.asb.dk/about/departments/bs.aspx
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Keywords: Euro; GARCH; Government Bonds; International Bond Markets; Volatility-Spillover;

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References

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  1. Baele, L., 2003. "Volatility Spillover Effects in European Equity Markets," Discussion Paper 2003-114, Tilburg University, Center for Economic Research.
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Cited by:
  1. Brian M Lucey & Suk-Joong Kim & Eliza Wu, 2005. "Dynamics of Bond Market Integration between Existing And Accession EU Countries," The Institute for International Integration Studies Discussion Paper Series iiisdp025, IIIS.
  2. Charlotte Christiansen, 2010. "Decomposing European bond and equity volatility," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 105-122.
  3. Faruk Balli, 2009. "Spillover effects on government bond yields in euro zone. Does full financial integration exist in European government bond markets?," Journal of Economics and Finance, Springer, vol. 33(4), pages 331-363, October.
  4. George Milunovich & Susan Thorp, 2005. "Valuing Volatility Spillovers," Research Papers 0506, Macquarie University, Department of Economics.
  5. Lieven Baele & Koen Inghelbrecht, 2005. "Structural versus Temporary Drivers of Country and Industry Risk," International Finance 0511005, EconWPA.
  6. Tuysuz, Sukriye & Kuhry, Yves, 2007. "Interactions between interest rates and the transmission of monetary and economic news: the cases of US and UK," MPRA Paper 5255, University Library of Munich, Germany.

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