Volatility Spillover Among Industries in the Capital Market in Iran
Journal of Money and Economy Vol. 12, No. 2, Spring 2017 pp. 213-233
21 Pages Posted: 11 Jun 2019
Date Written: 2017
Measuring the dynamic relationship between banking and industries with systemic importance has attracted much attention after the recent financial crisis. This paper examines the dynamic conditional correlations and volatility spillover using three popular multivariate GARCH models in the twelve-year period (from the beginning of 2005 to the beginning of 2016) among the fourteen systemically important industries in Iran’s capital market. The purpose of this study is to understand and identify the volatility spillover between industries to predict financial fluctuations, as well as policy decisions and risk management. The results of this study confirm the spillover between “Banking” and the five industries of "Basic Metals", "Industrial Multidisciplinary", "Investments", "Computers", and "Transportation & Warehousing". There is also an asymmetric spillover between “Banking” index and the "Chemical Industry", the "Extraction of Metal Ores", "Pharmaceuticals" and "Communications Devices". The results are used for mapping fundamental analysis and risk programming.
Keywords: Volatility Spillover, Dynamic Conditional Correlation, Banking Industries
JEL Classification: C22, C32, C58, G10
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