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Simultaneous Stochastic Volatility Transmission Across American Equity Markets

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  • Enzo Weber

Abstract

Information flows across international financial markets typically occur within hours, making volatility spillover appear contemporaneous in daily data. Such simultaneous transmission of variances is featured by the stochastic volatility model developed in this paper, in contrast to usually employed multivariate ARCH processes. The identification problem is solved by considering heteroscedasticity of the structural volatility innovations, and estimation takes place in an appropriately speci ed state space setup. In the empirical application, unidirectional volatility spillovers from the US stock market to three American countries are revealed. The impact is strongest for Canada, followed by Mexico and Brazil, which are subject to idiosyncratic crisis effects.

Suggested Citation

  • Enzo Weber, 2008. "Simultaneous Stochastic Volatility Transmission Across American Equity Markets," SFB 649 Discussion Papers SFB649DP2008-049, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    • Handle: RePEc:hum:wpaper:sfb649dp2008-049
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    Cited by:

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    2. Afees A. Salisu & Kazeem Isah, 2017. "Modeling the spillovers between stock market and money market in Nigeria," Working Papers 023, Centre for Econometric and Allied Research, University of Ibadan.
    3. Del Brio, Esther B. & Mora-Valencia, Andrés & Perote, Javier, 2017. "The kidnapping of Europe: High-order moments' transmission between developed and emerging markets," Emerging Markets Review, Elsevier, vol. 31(C), pages 96-115.
    4. Babajide Fowowe & Mohammed Shuaibu, 2016. "Dynamic spillovers between Nigerian, South African and international equity markets," International Economics, CEPII research center, issue 148, pages 59-80.
    5. Liu, Xueyong & An, Haizhong & Li, Huajiao & Chen, Zhihua & Feng, Sida & Wen, Shaobo, 2017. "Features of spillover networks in international financial markets: Evidence from the G20 countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 479(C), pages 265-278.
    6. Nourou, Mohammadou, 2015. "Can Mastitis ‘Contaminate’ Poultry? Evidence on the Transmission of Volatility between Poultry and Other Commodity Prices," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 18(A), pages 1-14, July.
    7. Xiaochun Liu, 2018. "Structural Volatility Impulse Response Function and Asymptotic Inference," Journal of Financial Econometrics, Oxford University Press, vol. 16(2), pages 316-339.
    8. Andrés Ramírez Hassan & Javier Pantoja Robayo, 2013. "Co-movements between Latin American and U.S. stock markets: convergence after the financial crisis," Documentos de Trabajo de Valor Público 10931, Universidad EAFIT.

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    More about this item

    Keywords

    Stochastic Volatility; Identification; Variance Transmission;
    All these keywords.

    JEL classification:

    • 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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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