The Study of the Spillover and Leverage Effects of Financial Exchange Traded Funds (ETFs)

19 Pages Posted: 2 Feb 2015

See all articles by Johui Chen

Johui Chen

Chung Yuan Christian University

Maya Malinda

Chung Yuan Christian University

Date Written: December 1, 2014

Abstract

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

Chen, Johui and Malinda, Maya, The Study of the Spillover and Leverage Effects of Financial Exchange Traded Funds (ETFs) (December 1, 2014). Frontiers in Finance and Economics,Vol 11 No 2, pp. 41-59, 2014, Available at SSRN: https://ssrn.com/abstract=2558779

Johui Chen (Contact Author)

Chung Yuan Christian University ( email )

22 Pu-Jen, Pu-chung Li
Chung-Li, 32023
Taiwan

Maya Malinda

Chung Yuan Christian University ( email )

22 Pu-Jen, Pu-chung Li
Chung-Li, 32023
Taiwan

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