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Volatility Spillovers across South African Asset Classes during Domestic and Foreign


  • Andrew S. Duncan
  • Alain Kabundi


This paper studies domestic volatility transmission in an emerging economy. Daily volatility spillover indices, relating to South African (SA) currencies, bonds and equities, are estimated using variance decompositions from a generalised vector autoregressive (GVAR) model (Pesaran and Shin 1998). The results suggest substantial time-variation in volatility linkages between October 1996 and June 2010. Typically, large increases in volatility spillovers coincide with domestic and foreign financial crises. Equities are the most important source of volatility spillovers to other asset classes. However, following the 2001 currency crisis, and up until mid-2006, currencies temporarily dominate volatility transmission. Bonds are a consistent net receiver of volatility spillovers. In comparison to similar research focussing on the United States (Diebold and Yilmaz 2010), volatility linkages between SA asset classes are relatively strong.

Suggested Citation

  • Andrew S. Duncan & Alain Kabundi, 2011. "Volatility Spillovers across South African Asset Classes during Domestic and Foreign," Working Papers 202, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:202

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    References listed on IDEAS

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    Cited by:

    1. Andrew S. Duncan & Alain Kabundi, 2014. "Global Financial Crises and Time-Varying Volatility Comovement in World Equity Markets," South African Journal of Economics, Economic Society of South Africa, vol. 82(4), pages 531-550, December.
    2. repec:eee:revfin:v:35:y:2017:i:c:p:57-65 is not listed on IDEAS
    3. Nico Katzke, 2013. "South African Sector Return Correlations: using DCC and ADCC Multivariate GARCH techniques to uncover the underlying dynamics," Working Papers 17/2013, Stellenbosch University, Department of Economics.
    4. Duncan, Andrew S. & Kabundi, Alain, 2013. "Domestic and foreign sources of volatility spillover to South African asset classes," Economic Modelling, Elsevier, vol. 31(C), pages 566-573.
    5. Cheteni, Priviledge, 2016. "Stock market volatility using GARCH models: Evidence from South Africa and China stock markets," MPRA Paper 77355, University Library of Munich, Germany.

    More about this item


    Asset Market Linkages; Dynamic Correlation; Financial Crisis; Generlised Vector Autoregression; Variance Decomposition; Volatility Spillover.;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G1 - Financial Economics - - General Financial Markets
    • F3 - International Economics - - International Finance

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