Volatility Spillovers, Interdependence and Comovements: A Markov Switching Approach

Computational Statistics & Data Analysis, Vol. 52, No. 6, pp. 3011-3026, 2008

Posted: 30 Apr 2009

See all articles by Giampiero M. Gallo

Giampiero M. Gallo

Corte dei Conti - Italian Court of Audits; University of Bologna - Rimini Center for Economic Analysis (RCEA); Universita' di Firenze - Dipartimento di Statistica, Informatica, Applicazioni "G.Parenti"

Edoardo Otranto

University of Messina; Universita di Cagliari - Centre for North South Economic Research (CRENOS)

Date Written: feb 28, 2008

Abstract

The transmission mechanisms of volatility between markets can be characterized within a new Markov Switching bivariate model where the state of one variable feeds into the transition probability of the state of the other. A number of model restrictions and hypotheses can be tested to stress the role of one market relative to another (spillover, interdependence, comovement, independence, Granger noncausality). The model is estimated on the weekly high-low range of five Asian markets, assuming a central (but not necessarily dominant) role for Hong Kong. The results show plausible market characterizations over the long run with a spillover from Hong Kong to Korea and Thailand, interdependence with Malaysia and comovement with Singapore.

Keywords: Markov Switching, Multiple chains, Volatility, Spillover effect, Comovements

JEL Classification: C22, C51, C53

Suggested Citation

Gallo, Giampiero M. and Otranto, Edoardo, Volatility Spillovers, Interdependence and Comovements: A Markov Switching Approach (feb 28, 2008). Computational Statistics & Data Analysis, Vol. 52, No. 6, pp. 3011-3026, 2008, Available at SSRN: https://ssrn.com/abstract=1396889

Giampiero M. Gallo (Contact Author)

Corte dei Conti - Italian Court of Audits ( email )

viale Mazzini
Roma, Roma 00195
Italy

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Universita' di Firenze - Dipartimento di Statistica, Informatica, Applicazioni "G.Parenti" ( email )

Viale G.B. Morgagni, 59
Florence, 50134
Italy
0039 055 2751 591 (Phone)
0039 055 4223560 (Fax)

HOME PAGE: http://www.disia.unifi.it/gallog

Edoardo Otranto

University of Messina ( email )

Piazza Pugliatti, 1
Messina, 98122
Italy

Universita di Cagliari - Centre for North South Economic Research (CRENOS) ( email )

V. S. Ignazio 78
Cagliari, 09124
Italy

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
434
PlumX Metrics