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Title:Better to give than to receive: predictive directional measurement of volatility spillovers PDF Logo
Authors:Diebold, Francis X.
Yilmaz, Kamil
Issue Date:2010
Series/Report no.:TÜSİAD-Koç University Economic Research Forum working paper series 1001 [rev.]
Abstract:Using a generalized vector autoregressive framework in which forecast-error variance decompositions are invariant to variable ordering, we propose measures of both total and directional volatility spillovers. We use our methods to characterize daily volatility spillovers across U.S. stock, bond, foreign exchange and commodities markets, from January 1999 through September 2009. We show that despite significant volatility fluctuations in all four markets during the sample, cross-market volatility spillovers were quite limited until the global financial crisis that began in 2007. As the crisis intensified so too did the volatility spillovers, with particularly important spillovers from the bond market to other markets taking place after the collapse of Lehman Brothers in September 2008.
Subjects:Asset Market
Asset Return
Stock Market
Market Linkage
Financial Crisis
Contagion
Vector Autoregression
Variance Decomposition
JEL:G1
F3
Document Type:Working Paper
Appears in Collections:ERF Working Paper Series, TÜSİAD-Koç University Economic Research Forum (ERF)

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