Does the Spillover Index Reflect Systemic Shocks? A Bootstrap-Based Probabilistic Analysis

Posted: 9 Jan 2020

See all articles by Matthew Greenwood‐Nimmo

Matthew Greenwood‐Nimmo

University of Melbourne - Department of Economics

Evžen Kočenda

Charles University in Prague - Institute of Economic Studies; Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics; CESifo; University of Regensburg - Institute for East and Southeast European Studies; University of Michigan at Ann Arbor - The William Davidson Institute

Viet Hoang Nguyen

University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Date Written: November 26, 2019

Abstract

The spillover index introduced by Diebold and Yilmaz (Economic Journal, 2009, vol. 119, pp. 158-171) is widely used in the analysis of financial market interlinkages. Abrupt increases in the spillover index are thought to be associated with systemic events but formal statistical support for this effect has yet to be provided. We develop a new bootstrap-based technique to evaluate the probability that the spillover index increases over an arbitrary time period following an exogenously defined event. Using the authors' original dataset, our results lend qualified support to the notion that the spillover index increases in a statistically significant manner in the wake of systemic shocks.

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Keywords: Spillover index; systemic events; bootstrap-after-bootstrap procedure

JEL Classification: C32, C58, G15

Suggested Citation

Greenwood‐Nimmo, Matthew and Kocenda, Evzen and Nguyen, Viet Hoang, Does the Spillover Index Reflect Systemic Shocks? A Bootstrap-Based Probabilistic Analysis (November 26, 2019). Melbourne Institute Working Paper No. 17, Available at SSRN: https://ssrn.com/abstract=3493481

Matthew Greenwood‐Nimmo

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

Evzen Kocenda

Charles University in Prague - Institute of Economic Studies ( email )

Opletalova St. 26
Prague, 11000
Czech Republic

HOME PAGE: http://kocenda.fsv.cuni.cz

Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics ( email )

Pod vodarenskou vezi 4
CZ-18208 Praha 8
Czech Republic

CESifo

Poschinger Str. 5
Munich, DE-81679
Germany

University of Regensburg - Institute for East and Southeast European Studies

Landshuterstr. 4
Regensburg, 93047
Germany

University of Michigan at Ann Arbor - The William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Viet Hoang Nguyen (Contact Author)

University of Melbourne - Melbourne Institute: Applied Economic & Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

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