Contemporaneous Spillover Effects between the U.S. and the U.K. Equity Markets

22 Pages Posted: 15 Jan 2017

See all articles by Marinela Adriana Finta

Marinela Adriana Finta

Singapore Management University

Bart Frijns

Auckland University of Technology - Faculty of Business & Law

Alireza Tourani‐Rad

Auckland University of Technology

Date Written: February 2017

Abstract

We use high frequency data and the “identification through heteroskedasticity” approach of Rigobon (2003) to capture the contemporaneous volatility spillover effects between the U.S. and U.K. equity markets. We demonstrate the relevance of taking into account the information present during simultaneous trading hours by comparing the results generated by our structural vector autoregression with those of a traditional reduced‐form vector autoregression. Our findings clearly demonstrate that contemporaneous relations matter and that ignoring them leads to inappropriate conclusions regarding the magnitude and direction of volatility spillover.

Keywords: contemporaneous spillovers, identification through heteroskedasticity, volatility spillovers

JEL Classification: C32, C58, G1

Suggested Citation

Finta, Marinela Adriana and Frijns, Bart and Tourani‐Rad, Alireza, Contemporaneous Spillover Effects between the U.S. and the U.K. Equity Markets (February 2017). Financial Review, Vol. 52, Issue 1, pp. 145-166, 2017. Available at SSRN: https://ssrn.com/abstract=2899157 or http://dx.doi.org/10.1111/fire.12116

Marinela Adriana Finta (Contact Author)

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore

Bart Frijns

Auckland University of Technology - Faculty of Business & Law ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand

Alireza Tourani‐Rad

Auckland University of Technology

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

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