Interdependency and Spillover during the Financial Crisis of 2007 to 2009 – Evidence from High Frequency Intraday Data
AbstractThe paper examines the intraday dynamics and volatility transmission among three European stock markets: Germany, France, the UK during the financial crisis of 2007-to-2009. After estimating the structural break date using Bai-Perron (1998, 2003), we analyze the pre-crisis and crisis periods using high frequency five-minute intraday data under the VAR-EGARCH framework. The empirical findings reveal that the interdependence among European markets increased substantially during the crisis period, pointing towards shift contagion. In addition, the results show that the German stock market strongly influences stock returns and volatility in France and the UK for all periods, while the reverse hold true but is mostly irrelevant. These findings have important implications for both policymakers and investors.
Download InfoIf 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.
Bibliographic InfoPaper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-126.
Length: 14 pages
Date of creation: 25 Feb 2014
Date of revision:
Volatility spillover; Global financial crisis; High frequency data;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
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.:
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- BAI, Jushan & PERRON, Pierre, 1998.
"Computation and Analysis of Multiple Structural-Change Models,"
Cahiers de recherche
9807, Universite de Montreal, Departement de sciences economiques.
- Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Brian M Lucey & Cal Muckley, 2011.
"Robust Global Stock Market Interdependencies,"
The Institute for International Integration Studies Discussion Paper Series
- Andersen, Torben G. & Bollerslev, Tim & Cai, Jun, 2000. "Intraday and interday volatility in the Japanese stock market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(2), pages 107-130, June.
- Andersen, Torben G. & Bollerslev, Tim, 1997. "Intraday periodicity and volatility persistence in financial markets," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 115-158, June.
- Angelos Kanas, 1998.
"Linkages between the US and European equity markets: further evidence from cointegration tests,"
Applied Financial Economics,
Taylor & Francis Journals, vol. 8(6), pages 607-614.
- Angelos Kanas, . "Linkages between the US and European Equity Markets: Further Evidence from cointegration Tests," Working Papers 9804, University of Crete, Department of Economics.
- Bialkowski, Jedrzej & Bohl, Martin T. & Serwa, Dobromil, 2006. "Testing for financial spillovers in calm and turbulent periods," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(3), pages 397-412, July.
- Braun, Phillip A & Nelson, Daniel B & Sunier, Alain M, 1995. " Good News, Bad News, Volatility, and Betas," Journal of Finance, American Finance Association, vol. 50(5), pages 1575-1603, December.
- Iwatsubo, Kentaro & Inagaki, Kazuyuki, 2006.
"Measuring Financial Market Contagion Using Dually-Traded Stocks of Asian Firms,"
CEI Working Paper Series
2006-14, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- Iwatsubo, Kentaro & Inagaki, Kazuyuki, 2007. "Measuring financial market contagion using dually-traded stocks of Asian firms," Journal of Asian Economics, Elsevier, vol. 18(1), pages 217-236, February.
- Jushan Bai & Pierre Perron, 1998.
"Estimating and Testing Linear Models with Multiple Structural Changes,"
Econometric Society, vol. 66(1), pages 47-78, January.
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
- Beine, Michel & Cosma, Antonio & Vermeulen, Robert, 2010.
"The dark side of global integration: Increasing tail dependence,"
Journal of Banking & Finance,
Elsevier, vol. 34(1), pages 184-192, January.
- Michel Beine & Antonio Cosma & Robert Vermeulen, 2008. "The Dark Side of Global Integration: Increasing Tail Dependence," CREA Discussion Paper Series 08-03, Center for Research in Economic Analysis, University of Luxembourg.
- Torben G. Andersen & Tim Bollerslev, 1998. "Deutsche Mark-Dollar Volatility: Intraday Activity Patterns, Macroeconomic Announcements, and Longer Run Dependencies," Journal of Finance, American Finance Association, vol. 53(1), pages 219-265, 02.
- Bekaert, Geert & Ehrmann, Michael & Fratzscher, Marcel & Mehl, Arnaud, 2011.
"Global crises and equity market contagion,"
Working Paper Series
1381, European Central Bank.
- Geert Bekaert & Michael Ehrmann & Marcel Fratzscher & Arnaud J. Mehl, 2011. "Global Crises and Equity Market Contagion," NBER Working Papers 17121, National Bureau of Economic Research, Inc.
- Bekaert, Geert & Ehrmann, Michael & Fratzscher, Marcel & Mehl, Arnaud, 2011. "Global crises and equity market contagion," CEPR Discussion Papers 8438, C.E.P.R. Discussion Papers.
- 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.
- Christie, Andrew A., 1982. "The stochastic behavior of common stock variances : Value, leverage and interest rate effects," Journal of Financial Economics, Elsevier, vol. 10(4), pages 407-432, December.
- 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.
- Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
- In, Francis & Kim, Sangbae & Yoon, Jai Hyung & Viney, Christopher, 2001. "Dynamic interdependence and volatility transmission of Asian stock markets: Evidence from the Asian crisis," International Review of Financial Analysis, Elsevier, vol. 10(1), pages 87-96.
- Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
- Jean-Michel Sahut & Medhi Mili & Frédéric Teulon, 2014.
"What is the linkage between real growth in the Euro area and global financial market conditions ?,"
2014-324, Department of Research, Ipag Business School.
- Jean-michel Sahut & Medhi Mili & Frédéric Teulon, 2012. "What is the linkage between real growth in the Euro area and global financial market conditions?," Economics Bulletin, AccessEcon, vol. 32(3), pages 2464-2480.
- Chen, Cathy W. S. & Chiang, Thomas C. & So, Mike K. P., 2003. "Asymmetrical reaction to US stock-return news: evidence from major stock markets based on a double-threshold model," Journal of Economics and Business, Elsevier, vol. 55(5-6), pages 487-502.
- Bhar, Ramaprasad & Nikolova, Biljana, 2009. "Return, volatility spillovers and dynamic correlation in the BRIC equity markets: An analysis using a bivariate EGARCH framework," Global Finance Journal, Elsevier, vol. 19(3), pages 203-218.
- Taylor, Stephen J. & Xu, Xinzhong, 1997. "The incremental volatility information in one million foreign exchange quotations," Journal of Empirical Finance, Elsevier, vol. 4(4), pages 317-340, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ingmar Schumacher).
If references are entirely missing, you can add them using this form.