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Asymmetry in return and volatility spillover between equity and bond markets in Australia

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  • Dean, Warren G.
  • Faff, Robert W.
  • Loudon, Geoffrey F.

Abstract

We document asymmetry in return and volatility spillover between equity and bond markets in Australia for daily returns during the period 1992-2006 using a bivariate GARCH modelling approach. Negative bond market returns spillover into lower stock market returns whereas good news originating in the equity market leads to lower bond returns. Bond market volatility spills over into the equity market but the reverse is not true. Transmission of bond volatility into equity volatility depends in a complex way upon the respective signs of the return shocks in each market.

Suggested Citation

  • Dean, Warren G. & Faff, Robert W. & Loudon, Geoffrey F., 2010. "Asymmetry in return and volatility spillover between equity and bond markets in Australia," Pacific-Basin Finance Journal, Elsevier, vol. 18(3), pages 272-289, June.
    • Handle: RePEc:eee:pacfin:v:18:y:2010:i:3:p:272-289
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