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Detecting signed spillovers in global financial markets: a Markov-switching approach
journal contribution
posted on 2023-05-21, 14:42 authored by Moses KangogoMoses Kangogo, Vladimir VolkovVladimir VolkovWe examine the dynamics of the signed-spillover across financial markets using historical decomposition approach. By incorporating Markov-switching framework into the VAR model, this paper assesses the dynamics of signed-spillover during turbulent periods and period of tranquillity. Additionally, this approach enables us to detect the source and direction of the spillover and identify its signs. We show that this approach outperforms the classical single-regime spillover estimation by distinguishing shocks under different economic conditions. Specifically, we assess spillovers in global financial markets using realised variance between January 1999 and December 2017. Our empirical findings clearly indicate that spillovers are intense during period of turbulence and moderate during periods of tranquillity.
History
Publication title
International Review of Financial AnalysisVolume
82Article number
102161Number
102161ISSN
1057-5219Department/School
TSBEPublisher
Elsevier BVPlace of publication
NetherlandsRights statement
© 2022 Elsevier Inc. All rights reserved.Repository Status
- Restricted