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Volatility spillovers and Financial contagion during global financial crisis: Islamic versus conventional equity indices with Multivariate GARCH approch

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  • houidi, Fatma
  • Ellouz, Siwar

Abstract

This paper examines the volatility spillovers and the contagion effects of the 2007-2009 global financial crisis across the U.S. conventional stock market and a sample of local and global Islamic and conventional stock markets provided by the Dow Jones index, namely the United Kingdom, Canada, Europe, the Emerging-market countries and Asia-Pacific. The analysis extends from December 31, 2004 to September 30, 2016 and encompasses expansion and recession periods of the global financial crisis using the BEKK-GARCH, the DCC-GARH and the ADCC-GJR-GARCH-t models. As a result, we show evidence of high volatility transmission and significant dynamic correlations spread from the U.S. traditional stock market to each global and regional Islamic and conventional stock markets. In this light, the resilience and the decoupling hypotheses are not supported for the Islamic indices. This study has significant policy implications for portfolio diversification and provides more insights into systemic risk in these regions.

Suggested Citation

  • houidi, Fatma & Ellouz, Siwar, 2021. "Volatility spillovers and Financial contagion during global financial crisis: Islamic versus conventional equity indices with Multivariate GARCH approch," MPRA Paper 122530, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:122530
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    References listed on IDEAS

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    More about this item

    Keywords

    Volatility spillovers ; Financial contagion ; Dynamic conditional correlations ; Islamic finance ; Global finacial crisis ; Global and regional stock markets ; Multivariate GARCH.;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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