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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 Volkov
We 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 Analysis

Volume

82

Article number

102161

Number

102161

ISSN

1057-5219

Department/School

TSBE

Publisher

Elsevier BV

Place of publication

Netherlands

Rights statement

© 2022 Elsevier Inc. All rights reserved.

Repository Status

  • Restricted

Socio-economic Objectives

Financial services not elsewhere classified

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