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Networks of Volatility Spillovers among Stock Markets

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  • Eduard Baumöhl
  • Evžen Kocenda
  • Stefan Lyócsa
  • Tomás Vyrost

Abstract

In our network analysis of 40 developed, emerging and frontier stock markets during 2006–2014, we describe and model volatility spillovers during global financial crisis and tranquil periods. The resulting market interconnectedness is depicted by fitting a spatial model incorporating several exogenous characteristics. We show significant temporal proximity effects between markets and somewhat weaker temporal effects with regard to the US equity market – volatility spillovers decrease when markets are characterized by greater temporal proximity. Volatility spillovers also present a high degree of interconnectedness. Our results also link spillovers of escalating magnitude with increasing market size, market liquidity and economic openness.

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  • Eduard Baumöhl & Evžen Kocenda & Stefan Lyócsa & Tomás Vyrost, 2017. "Networks of Volatility Spillovers among Stock Markets," CESifo Working Paper Series 6476, CESifo.
    • Handle: RePEc:ces:ceswps:_6476
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    Keywords

    volatility spillovers; stock markets; shock transmission; Granger causality network; spatial regression; financial crisis;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F01 - International Economics - - General - - - Global Outlook
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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