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Does the Spillover Index Reflect Systemic Shocks? A Bootstrap-Based Probabilistic Analysis

Author

Listed:
  • Matthew Greenwood-Nimmo

    (The University of Melbourne)

  • Evžen KoÄ enda

    (Institute of Economic Studies, Charles University)

  • Viet Hoang Nguyen

    (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne)

Abstract

The spillover index introduced by Diebold and Yilmaz (Economic Journal, 2009, vol. 119, pp. 158-171) is widely used in the analysis of financial market interlinkages. Abrupt increases in the spillover index are thought to be associated with systemic events but formal statistical support for this effect has yet to be provided. We develop a new bootstrap-based technique to evaluate the probability that the spillover index increases over an arbitrary time period following an exogenously defined event. Using the authors' original dataset, our results lend qualified support to the notion that the spillover index increases in a statistically significant manner in the wake of systemic shocks. To obtain a copy of this paper, please email the author.

Suggested Citation

  • Matthew Greenwood-Nimmo & Evžen KoÄ enda & Viet Hoang Nguyen, 2019. "Does the Spillover Index Reflect Systemic Shocks? A Bootstrap-Based Probabilistic Analysis," Melbourne Institute Working Paper Series wp2019n17, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2019n17
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    File URL: https://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0008/3238820/WP2019n17.pdf
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    Cited by:

    1. Albrecht, Peter & Kočenda, Evžen, 2024. "Volatility connectedness on the central European forex markets," International Review of Financial Analysis, Elsevier, vol. 93(C).

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    Keywords

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    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
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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