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Intraday Volatility Spillovers among European Financial Markets during COVID-19

Author

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  • Faheem Aslam

    (Department of Management Sciences, Comsats University, Islamabad 45550, Pakistan
    Business School, Hanyang University, Seoul 04763, Korea)

  • Paulo Ferreira

    (VALORIZA—Research Center for Endogenous Resource Valorization, 7300-555 Portalegre, Portugal
    Department of Economic Sciences and Organizations, Polytechnic Institute of Portalegre, 7300-555 Portalegre, Portugal
    CEFAGE-UE, IIFA, University of Évora, 7000 Évora, Portugal)

  • Khurrum Shahzad Mughal

    (State Bank of Pakistan, Karachi 74200, Pakistan)

  • Beenish Bashir

    (Department of Management Sciences, Comsats University, Islamabad 45550, Pakistan)

Abstract

During crises, stock market volatility generally rises sharply, and as consequence, spillovers are identified across markets. This study estimates the volatility spillover among twelve European stock markets representing all four regions of Europe. The data consists of 10,990 intraday observations from 2 December 2019 to 29 May 2020. Using the methodology of Diebold and Yilmaz, we use static and rolling windows to characterize five-minute volatility spillovers. Our results show that 77.80% of intraday volatility forecast error variance in twelve European markets comes from spillovers. Furthermore, the highest gross directional volatility spillovers are found in Sweden and the Netherlands, while the minimum spillovers to other stock markets are observed in the stock markets of Poland and Ireland. However, German and Dutch markets transmit the highest net directional volatility spillovers. Splitting the whole sample in pre- and post-pandemic declaration (11 March 2020) we find more stable spillovers in the latter. The findings reveal important information about European stock market interdependence during COVID-19, which will be beneficial to both policy-makers and practitioners.

Suggested Citation

  • Faheem Aslam & Paulo Ferreira & Khurrum Shahzad Mughal & Beenish Bashir, 2021. "Intraday Volatility Spillovers among European Financial Markets during COVID-19," IJFS, MDPI, vol. 9(1), pages 1-19, January.
    • Handle: RePEc:gam:jijfss:v:9:y:2021:i:1:p:5-:d:475123
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