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Intra-daily volatility spillovers between the US and German stock markets

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  • Golosnoy, Vasyl
  • Gribisch, Bastian
  • Liesenfeld, Roman

Abstract

Using a novel three-phase model based upon a conditional autoregressive Wishart (CAW) framework for the realized (co)variances of the US Dow Jones and the German stock index DAX, we analyze intra-daily volatility spillovers between the US and German stock markets. The proposed model explicitly accounts for three distinct intraday periods resulting from the non-synchronous and partially overlapping opening hours of the two markets. We find evidence of significant short-term volatility spillovers from one intraday period to the next within both markets ('heat-wave effects') as well as across the two markets ('meteor-shower effects'). Furthermore, we find that during the subprime crisis the general persistence of short-term volatility shocks is considerably higher and the spillovers effects between the US and the German stock markets are significantly larger than before the crisis, indicating substantial volatility contagion effects. --

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Bibliographic Info

Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2012-06.

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Date of creation: 2012
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Handle: RePEc:zbw:cauewp:201206

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Keywords: Conditional autoregressive Wishart model; Impulse response analysis; Observationdriven models; Realized covariance matrix; Subprime crisis;

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