Volatility linkages and spillovers in stock and bond markets : some international evidence
Fang, Victor, Lin, Edward and Lee, Vincent 2007, Volatility linkages and spillovers in stock and bond markets : some international evidence, Journal of international finance and economics, vol. 7, no. 1, pp. 1-10.
This study investigates the transmission of market-wide volatility between the equity markets and bond markets of Japan, Germany, the U. K., and the U. S. To measure the volatility transmission, the BEKK- a decomposition approach to the multivariate GARCH (1,1) model, is used to examine the cross-market contemporaneous effect of information arrival. Our results suggest that within the domestic cross markets, the volatility transmission is undirectional from the stock market to the bond market. Evidence from international cross-market analysis is mixed, with strong evidence on volatility spillover among these international stock markets, but weak evidence between international stock and bond markets. In addition, there are significant bi-directional volatility transmissions between stock markets in Germany and the U. K., and between Germany and the U. S. The volatility transmissions among these markets suggest that the international diversification of bonds is not prevalent.
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Field of Research
159999 - Commerce, Management, Tourism and Services not elsewhere classified
Socio Economic Objective
970115 - Expanding Knowledge in Commerce, Management, Tourism and Services
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