The Study of the Spillover and Leverage Effects of Financial Exchange Traded Funds (ETFs)
19 Pages Posted: 2 Feb 2015
Date Written: December 1, 2014
This study adopts the Generalized Autoregressive Conditional Heteroskedasticity-in-Mean Autoregressive Moving Average (GARCH-M-ARMA) and Exponentially Generalized Autoregressive Conditional Heteroskedasticity-in-Mean Autoregressive Moving Average (EGARCH-M-ARMA) models to analyze the spillover, asymmetric volatility, and leverage effects of financial exchange-traded funds (ETFs). The results show that bilateral relationships exist between financial and non-financial ETFs. Both ETFs have negative asymmetric volatility, suggesting that the value of stock indices and ETFs reveal conditional heterokesdasticity. Financial and non-financial ETFs also have negative leverage effects on benchmark indexes. Bilateral relations in terms of the spillover effects of volatilities and leverage effects exist between financial and non-financial ETFs.
Keywords: Spillover Effect, Asymmetric-Volatility, Leverage Effect, Financial ETFs
JEL Classification: G1
Suggested Citation: Suggested Citation