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Volatility Connectedness of Bank Stocks Across the Atlantic

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  • Kamil Yilmaz

    (Koc University)

Abstract

This paper presents an analysis of the dynamic measures of volatility connectedness of major bank stocks in the US and the EU member countries. The results show that in the early stages of the US financial crisis in 2007 and 2008, the direction of the volatility connectedness was from the US banks towards the EU banks. However, once the financial crisis became global in the last quarter of 2008, volatility connectedness became bi-directional. The surge in volatility connectedness from the EU banks to the US banks in June 2011 was unprecedented, reflecting the scale of deterioration in the state of the EU banks. Finally, the within-connectedness of the US banks fluctuated throughout our sample period, while the within-connectedness of the EU banks increased steadily since 2007, a reflection of the fact that the European debt and banking crisis has not ended yet.

Suggested Citation

  • Kamil Yilmaz, 2014. "Volatility Connectedness of Bank Stocks Across the Atlantic," Koç University-TUSIAD Economic Research Forum Working Papers 1402, Koc University-TUSIAD Economic Research Forum.
    • Handle: RePEc:koc:wpaper:1402
    as

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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1402.pdf
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    References listed on IDEAS

    as
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    5. Diebold, Francis X. & Yilmaz, Kamil, 2012. "Better to give than to receive: Predictive directional measurement of volatility spillovers," International Journal of Forecasting, Elsevier, vol. 28(1), pages 57-66.
    6. Dungey Mardi & Matteo Luciani & David Veredas, "undated". "Googling SIFIs," ULB Institutional Repository 2013/154950, ULB -- Universite Libre de Bruxelles.
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    Cited by:

    1. Brunetti, Celso & Harris, Jeffrey H. & Mankad, Shawn & Michailidis, George, 2019. "Interconnectedness in the interbank market," Journal of Financial Economics, Elsevier, vol. 133(2), pages 520-538.
    2. Tihana ŠKRINJARIĆ & Lidija DEDI & Boško ŠEGO, 2021. "Return and Volatility Spillover between Stock Prices and Exchange Rates in Croatia: A Spillover Methodology Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 93-108, December.
    3. Ogbuabor, Jonathan E. & Anthony-Orji, Onyinye I. & Manasseh, Charles O. & Orji, Anthony, 2020. "Measuring the dynamics of COMESA output connectedness with the global economy," The Journal of Economic Asymmetries, Elsevier, vol. 21(C).

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    More about this item

    Keywords

    Risk measurement; systemic risk; connectedness; systemically important financial institutions; vector autoregression; variance decomposition;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G2 - Financial Economics - - Financial Institutions and Services

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