Measuring spot variance spillovers when (co)variances are time-varying – the case of multivariate GARCH models
Journal
Oxford bulletin of economics and statistics
ISSN
0305-9049
ISSN-Digital
1468-0084
Type
journal article
Date Issued
2018
Author(s)
Abstract
In highly integrated markets, news spreads at a fast pace and bedevils risk monitoring and optimal asset allocation. We therefore propose global and disaggregated measures of variance transmission that allow one to assess spillovers locally in time. Key to our approach is the vector ARMA representation of the second-order dynamics of the popular BEKK model. In an empirical application to a four-dimensional system of US asset classes – equity, fixed income, foreign exchange and commodities – we illustrate the second-order transmissions at various levels of (dis)aggregation. Moreover, we demonstrate that the proposed spillover indices are informative on the value-at-risk violations of portfolios composed of the considered asset classes
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Quantitative Economic Methods
Refereed
Yes
Publisher
Wiley-Blackwell
Publisher place
Oxford
Volume
80
Number
1
Start page
135
End page
159
Pages
24
Eprints ID
252077