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Are generalized spillover indices overstating connectedness?

Author

Listed:
  • Wiesen, Thomas F.P.
  • Beaumont, Paul M.
  • Norrbin, Stefan C.
  • Srivastava, Anuj

Abstract

Spillover indices computed from VAR models are intended to measure the connectedness between the variables in the system. The generalized spillover index (gSOI) computed using the generalized forecast error variance decomposition is often considerably larger than the conventional spillover index computed from specific Cholesky decompositions leading to the speculation that the gSOI produces an unreasonable measure of connectedness. We demonstrate that the gSOI does not produce unrealistic values.

Suggested Citation

  • Wiesen, Thomas F.P. & Beaumont, Paul M. & Norrbin, Stefan C. & Srivastava, Anuj, 2018. "Are generalized spillover indices overstating connectedness?," Economics Letters, Elsevier, vol. 173(C), pages 131-134.
    • Handle: RePEc:eee:ecolet:v:173:y:2018:i:c:p:131-134
    DOI: 10.1016/j.econlet.2018.10.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Connectedness; Contagion; Market integration; Market linkage; Variance decomposition;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • 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

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