Intra-Daily Volatility Spillovers between the US and German Stock Markets

38 Pages Posted: 25 May 2012

See all articles by Vasyl Golosnoy

Vasyl Golosnoy

Ruhr University of Bochum

Bastian Gribisch

University of Cologne - Department of Econometrics and Statistics

Roman Liesenfeld

University of Cologne, Department of Economics

Date Written: May 5, 2012

Abstract

Using a novel three-phase model based upon a conditional autoregressive Wishart (CAW) framework for the realized (co)variances of the Dow Jones and the German stock index DAX, we analyze intra-daily volatility spillovers between the US and German stock markets. The proposed model explicitly accounts for three distinct intraday periods resulting from the non-synchronous and partially overlapping opening hours of the two markets. We find evidence of significant short-term volatility spillovers from one intra-day period to the next within both markets ('heat-wave effects') as well as across the two markets ('meteor-shower effects').Furthermore, we find that during the subprime crisis the general persistence of short-term volatility shocks is substantially higher and the spillovers effects between the US and the German stock markets are significantly larger than before the crisis, indicating substantial volatility contagion effects.

Keywords: Conditional autoregressive Wishart model, Impulse Response Analysis, Observation-driven models, Realized covariance matrix

JEL Classification: C32, C51, G15

Suggested Citation

Golosnoy, Vasyl and Gribisch, Bastian and Liesenfeld, Roman, Intra-Daily Volatility Spillovers between the US and German Stock Markets (May 5, 2012). Available at SSRN: https://ssrn.com/abstract=2066738 or http://dx.doi.org/10.2139/ssrn.2066738

Vasyl Golosnoy (Contact Author)

Ruhr University of Bochum ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

Bastian Gribisch

University of Cologne - Department of Econometrics and Statistics ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Roman Liesenfeld

University of Cologne, Department of Economics ( email )

Albertus-Magnus-Platz
D-50931 Köln
Germany

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