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The transmission of shocks among S&P indexes

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  • Bradley Ewing

Abstract

Financial market participants pay particular attention to the behaviour of equity indexes due, in part, to the popularity of index investing and the reliance on market and sector indexes to evaluate managed portfolios. Five major S&P stock indexes are examined to determine their interrelationships and how shocks to one index are transmitted to the others. The paper employs the newly developed technique of generalized forecast error variance decomposition [Koop et al. (1996); Pesaran and Shin (1998)]. Unlike the traditional orthogonalized decomposition, the generalized version is invariant to the ordering of the variables in the underlying vector autoregression. The results provide important information about the transmission of shocks among these indexes.

Suggested Citation

  • Bradley Ewing, 2002. "The transmission of shocks among S&P indexes," Applied Financial Economics, Taylor & Francis Journals, vol. 12(4), pages 285-290.
  • Handle: RePEc:taf:apfiec:v:12:y:2002:i:4:p:285-290
    DOI: 10.1080/09603100110090172
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    Citations

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    Cited by:

    1. James Payne, 2003. "Shocks to macroeconomic state variables and the risk premium of REITs," Applied Economics Letters, Taylor & Francis Journals, vol. 10(11), pages 671-677.
    2. Ewing Bradley T. & Thompson Mark A., 2012. "Historical Returns and the Appropriate Time-Frame for Future Value Calculations: Implications for Risk Management and Personal Financial Planning," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 7(1), pages 1-12, May.
    3. Malik, Farooq & Ewing, Bradley T., 2009. "Volatility transmission between oil prices and equity sector returns," International Review of Financial Analysis, Elsevier, vol. 18(3), pages 95-100, June.
    4. Amado Peiró, 2016. "Cross-autocorrelations in European stock returns," Economics and Business Letters, Oviedo University Press, vol. 5(1), pages 30-37.
    5. repec:taf:oaefxx:v:4:y:2016:i:1:p:1266788 is not listed on IDEAS
    6. Ahmed, Walid M.A., 2011. "Comovements and Causality of Sector Price Indices: Evidence from the Egyptian Stock Exchange," MPRA Paper 28127, University Library of Munich, Germany.
    7. Yavas, Burhan F. & Dedi, Lidija, 2016. "An investigation of return and volatility linkages among equity markets: A study of selected European and emerging countries," Research in International Business and Finance, Elsevier, vol. 37(C), pages 583-596.
    8. Wang, Zijun & Kutan, Ali M. & Yang, Jian, 2005. "Information flows within and across sectors in Chinese stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(4-5), pages 767-780, September.
    9. Youta Ishii, 2008. "International transmissions in US-Japanese stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 18(15), pages 1193-1200.
    10. Linh Xuan Diep Nguyen & Simona Mateut & Thanaset Chevapatrakul, 2016. "Business-Linkage Volatility Spillover between US Industries," Discussion Papers 2016/05, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    11. Walid M.A. Ahmed, 2012. "On the interdependence structure of market sector indices: the case of Qatar Exchange," Review of Accounting and Finance, Emerald Group Publishing, vol. 11(4), pages 468-488, October.
    12. Jian Yang & James Kolari & Guozhong Zhu, 2005. "European public real estate market integration," Applied Financial Economics, Taylor & Francis Journals, vol. 15(13), pages 895-905.
    13. Jian Yang, 2005. "Government bond market linkages: evidence from Europe," Applied Financial Economics, Taylor & Francis Journals, vol. 15(9), pages 599-610.
    14. Hassan, Syed Aun & Malik, Farooq, 2007. "Multivariate GARCH modeling of sector volatility transmission," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(3), pages 470-480, July.
    15. James E. Payne, 2006. "Further evidence on the transmission of shocks across REIT markets: an examination of REIT sub-sectors," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(3), pages 141-146, May.
    16. Gulin Vardar & Gokce Tunc & Berna Aydogan, 2012. "Long-Run and Short-Run Dynamics among the Sectoral Stock Indices: Evidence from Turkey," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(2), pages 347-357, June.
    17. James E. Payne, 2006. "The response of sub-sector REIT returns to shocks in fundamental state variables," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(2), pages 71-75, March.

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