Testing for Global Volatility Spillover, Financial Contagion and Structural Break in Fifteen Economies from Two Regions: A Diagonal VECH Matrix and EGARCH (1,1) Approach

Raisul Islam, M Talhatul Islam, Abdul Hannan Chowdhury

Abstract


This paper studies the transmission of volatility and financial contagion among 15 countries from two regions. The extensiveness and the scope of the current paper outlines the shifting of market attributes globally, in the pre and post financial crisis period. The most significant markets in the two regions (Asia/Pacific and Europe) are studied for own-volatility spillover up to five lags and cross volatility spillover in a multivariate GARCH diagonal VECH model framework. The switch of the regional market structure is captured with “structural break” phenomenon applying partial asymmetric EGARCH that overcomes non-negativity constraints of volatility clustering. The methods combined, compare and contrast the short term variability and long term regime shifts in the two most dynamic regions of the financial world in the post global financial crisis period.

Full Text: PDF DOI: 10.5539/ijef.v5n5p159

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

Copyright © Canadian Center of Science and Education

To make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.