Understanding Volatility Spillover: Interconnectedness and Implications
Published: 2022
Author(s) Name: J. Sahaya Shabu, M. Prabaharan |
Author(s) Affiliation: Xavier Inst. of Business Administration, St. Xaviers College (Autonomous), Palayamkottai, Tamil Nadu
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Abstract
This article provides an overview of volatility spillover, which refers to the transmission of volatility from one market or asset to another. It explores the interconnectedness and interdependencies between financial markets and instruments that contribute to spillover effects. Various methods used to analyze volatility spillover, such as Granger causality tests, VAR models, MGARCH models, correlation analysis, and network analysis, are discussed. The article also highlights the implications of volatility spillover for investors, risk management, monetary policy, regulatory policies, and investment decisions. Overall, understanding volatility spillover is crucial for effective decision-making in the financial industry.
Keywords: Volatility, Spillover, Stocks
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