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Volatility contagion: A range-based volatility approach

  • Chiang, Min-Hsien
  • Wang, Li-Min
Registered author(s):

    This article proposes a new approach to evaluate volatility contagion in financial markets. A time-varying logarithmic conditional autoregressive range model with the lognormal distribution (TVLCARR) is proposed to capture the possible smooth transition in the range process. Additionally, a smooth transition copula function is employed to detect the volatility contagion between financial markets. The approach proposed is applied to the stock markets of the G7 countries to investigate the volatility contagion due to the subprime mortgage crisis. Empirical evidence shows that volatility is contagious from the US market to several markets examined.

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    File URL: http://www.sciencedirect.com/science/article/pii/S030440761100145X
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    Article provided by Elsevier in its journal Journal of Econometrics.

    Volume (Year): 165 (2011)
    Issue (Month): 2 ()
    Pages: 175-189

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    Handle: RePEc:eee:econom:v:165:y:2011:i:2:p:175-189
    Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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