Asymmetry in return and volatility spillover between equity and bond markets in Australia

Dean, Warren G.; Faff, Robert W.; Loudon, Geoffrey

doi:10.1016/j.pacfin.2009.09.003

Cited by 98 publications

(49 citation statements)

References 30 publications

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“…In another study, Zhang, Zhang, Wang, and Zhang (2013) investigate volatility spillover between domestic equity and bond market in G7 and BRICS countries, and found either significantly nondirectional or bidirectional spillover in most developed markets, except Russia, where volatility spillover from all the countries studied is weak in either direction, essentially underpinning the weak link between the Russian equity or bond market and those of the rest of G7 and BRICS countries. Using asymmetry GARCH model between Australian equity and bond markets for the period 1992 to 2006, Dean, Faff, and Loudon (2010) conclude that the transmission of volatility between the two markets is dependent on the different signals of returns shock in each of the markets. Barunik, Kocenda, and Vacha (2015) in a study on volatility spillover across petroleum markets using the realized semi variances of petroleum commodities, (crude oil, gasoline, and heating oil) between 1987 and 2014, show that there is a correlation between volatility spillover increase and progressive finalization of the above mentioned commodities.…”

Section: Literature Reviewmentioning

confidence: 97%

Oil price shocks and volatility spillovers in the Nigerian sovereign bond market

Tule¹,

Ndako²,

Onipede³

2017

Rev Financ Econ

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This paper investigates volatility spillover in the Nigerian sovereign bond market arising from oil price shocks, using Vector Autoregressive Moving Average ‐ Asymmetric Generalized Autoregressive Conditional Heteroscedasticity (VARMA‐AGARCH) model. The paper covers the period March 22, 2011 to April 14, 2016 and makes use of the daily data of the Nigerian Sovereign Bond, Brent oil and West Texas Intermediate (WTI), respectively. We endogenously and sequentially detect structural break points using the test of Bai and Perron (2003) framework. In order to accurately estimate the model, we modify it by incorporating the break points into the VARMA‐AGARCH model, a process which if ignored would lead to model misspecification. The results obtained demonstrate a significant cross‐market volatility transmission between oil and sovereign bond market with ample sensitivity to structural breaks. The study also computes optimum weight portfolio and hedge ratio both with and without structural breaks and results equally indicate sensitivity to structural breaks.

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Section: Literature Reviewmentioning

confidence: 97%

Oil price shocks and volatility spillovers in the Nigerian sovereign bond market

Tule¹,

Ndako²,

Onipede³

2017

Rev Financ Econ

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“…Therefore, the information reflecting the economic fundamentals of global stock markets diffuses from the US to other countries' markets, creating the volatility spillover. This paper is related to a growing number of papers on volatility spillover in stock markets (see, e.g., Barunik, Krehlik, & Vacha, 2016;Bonato, Caporin, & Ranaldo, 2013;Buncic & Gisler, 2016;Dean, Faff, & Loudon, 2010;Eun & Shim, 1989;Fengler & Gisler, 2015;Hamao, Masulis, & Ng, 1990;Lin, Engle, & Ito, 1994). Most of these studies, except for Bonato et al (2013) and Buncic and Gisler (2016), are limited to in-sample evidence concerning the presence or absence of volatility spillover but do not give out-of-sample results.…”

Section: Introductionmentioning

confidence: 99%

Volatility spillover from the US to international stock markets: A heterogeneous volatility spillover GARCH model

Wang

Pan

2018

Journal of Forecasting

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A recent study by Rapach, Strauss, and Zhou (Journal of Finance, 2013, 68(4), 1633–1662) shows that US stock returns can provide predictive content for international stock returns. We extend their work from a volatility perspective. We propose a model, namely a heterogeneous volatility spillover–generalized autoregressive conditional heteroskedasticity model, to investigate volatility spillover. The model specification is parsimonious and can be used to analyze the time variation property of the spillover effect. Our in‐sample evidence shows the existence of strong volatility spillover from the US to five major stock markets and indicates that the spillover was stronger during business cycle recessions in the USA. Out‐of‐sample results show that accounting for spillover information from the USA can significantly improve the forecasting accuracy of international stock price volatility.

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“…While, for instance, Fleming et al (1998) used the Chicago Mercantile Exchange Treasury bill futures contract as the proxy for the money market, Badrinath and Apte (2005) used the call money rate. Dean et al (2010) investigate asymmetry in return and volatility spillover between equity and bond markets in Australia during the period 1992-2006 using a bivariate GARCH modelling approach. They provide evidence to show that negative bond market returns spill over into lower stock market returns, whereas good news originating in the equity market leads to lower bond returns.…”

Section: Brief Review Of Empirical Literaturementioning

confidence: 99%

Volatility transmission between money and stock markets: Evidence from a developing financial market

Emenike

2017

J. econ. financ. sci.

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The direction and intensity of volatility transmission between the money and stock markets are important for portfolio selection and diversification, optimal hedging strategy, financial market regulation, and risk management. The purpose of this paper therefore is to examine the nature of volatility transmission between money and stock markets in a developing economy using Nigeria data. The results of the bivariate BEKK-GARCH (1,1) model show strong evidence of ARCH and GARCH effects for both the money and stock markets returns. The results also suggest unidirectional shock transmission from the stock market to the money but not otherwise. Further, the results indicate evidence of a unidirectional volatility transmission from the stock market to the money market. The findings of this study have implications for portfolio selection and diversification as well as financial market regulation.

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Asymmetry in return and volatility spillover between equity and bond markets in Australia

Cited by 98 publications

References 30 publications

Oil price shocks and volatility spillovers in the Nigerian sovereign bond market

Oil price shocks and volatility spillovers in the Nigerian sovereign bond market

Volatility spillover from the US to international stock markets: A heterogeneous volatility spillover GARCH model

Volatility transmission between money and stock markets: Evidence from a developing financial market

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