Measuring Financial Asset Return and Volatility Spillovers, with Application to Global Equity Markets

20 Pages Posted: 15 Feb 2008 Last revised: 28 Sep 2022

See all articles by Francis X. Diebold

Francis X. Diebold

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Kamil Yilmaz

Koc University

Multiple version iconThere are 2 versions of this paper

Date Written: February 2008

Abstract

We provide a simple and intuitive measure of interdependence of asset returns and/or volatilities. In particular, we formulate and examine precise and separate measures of return spillovers and volatility spillovers. Our framework facilitates study of both non-crisis and crisis episodes, including trends and bursts in spillovers, and both turn out to be empirically important. In particular, in an analysis of nineteen global equity markets from the early 1990s to the present, we find striking evidence of divergent behavior in the dynamics of return spillovers vs. volatility spillovers: Return spillovers display a gently increasing trend but no bursts, whereas volatility spillovers display no trend but clear bursts.

Suggested Citation

Diebold, Francis X. and Yilmaz, Kamil, Measuring Financial Asset Return and Volatility Spillovers, with Application to Global Equity Markets (February 2008). NBER Working Paper No. w13811, Available at SSRN: https://ssrn.com/abstract=1093648

Francis X. Diebold (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
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HOME PAGE: http://www.ssc.upenn.edu/~fdiebold/

National Bureau of Economic Research (NBER)

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Kamil Yilmaz

Koc University ( email )

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Sariyer
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Turkey
+90 212 338 1458 (Phone)
+90 212 338 1653 (Fax)

HOME PAGE: http://https://sites.google.com/view/kamilyilmaz/

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