Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79903
Authors: 
Strohsal, Till
Weber, Enzo
Year of Publication: 
2013
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: International Financial Markets G21-V3
Abstract: 
In the academic literature, the economic interpretation of stock market volatility is inherently ambivalent, being considered an indicator of either information flow or uncertainty. We show in a stylized model economy that both views suggest volatility-dependent cross-market spillovers. If higher volatility in one market leads to higher (lower) reactions in another market, volatility reflects information (uncertainty). We introduce a simultaneous time-varying coefficient model, where structural ARCH-type variances serve two purposes: governing the time variation of spillovers and ensuring statistical identification. The model is applied to data of US and further stock markets. Indeed, we find strong nonlinear, volatility-dependent effects.
JEL: 
G15
C32
C58
Document Type: 
Conference Paper

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