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On bank return and volatility spillovers: Identifying transmitters and receivers during crisis periods

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  • Apostolakis, George N.
  • Floros, Christos
  • Giannellis, Nikolaos

Abstract

This study investigates dynamic bank-return correlation and spillovers among G7 advanced markets, employing an asymmetric multivariate GARCH approach and the forecast-error variance decomposition framework of a generalized VAR model and using a time-varying parameter autoregressive model. We utilize weekly bank stock indices over a long period (2000–2020) covering the recent Global Financial Crisis (GFC) and the subsequent European Sovereign Debt Crisis (ESDC). Dynamic spillover analysis reveals evidence of contagion effects during recent episodes. It is also shown that the impact of the GFC is notably higher than that of the ESDC. Major spillover transmitters are the markets of France, Germany and the UK, with the US market being vulnerable to shocks from European markets. Useful implications arise for policy makers and investors.

Suggested Citation

  • Apostolakis, George N. & Floros, Christos & Giannellis, Nikolaos, 2022. "On bank return and volatility spillovers: Identifying transmitters and receivers during crisis periods," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 156-176.
    • Handle: RePEc:eee:reveco:v:82:y:2022:i:c:p:156-176
    DOI: 10.1016/j.iref.2022.06.009
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    2. Han-Yu Zhu & Peng-Fei Dai & Wei-Xing Zhou, 2024. "Uncovering the Sino-US dynamic risk spillovers effects: Evidence from agricultural futures markets," Papers 2403.01745, arXiv.org.
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    More about this item

    Keywords

    DCC; TVP-VAR; Return spillovers; Bank volatility; Financial crises; Connectedness; Contagion; Asymmetries; GJR;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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