Chen, C. Y.-H. (2014) Does Fear Spill Over? Asia-Pacific Journal of Financial Studies, 43(4), pp. 465-491. (doi: 10.1111/ajfs.12055)
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Abstract
This paper develops a new methodology for analyzing fear spillovers between four implied volatility indices (MVX in Canada, VXJ in Japan, VDAX in Germany and VIX in the United States) using a copula‐based bivariate Markov‐switching model. We consider a parameterization of the Markov‐switching model that allows for four possible states (consisting of combinations of either low or high expected volatilities). This model also combines selected copulas to describe the dependence pattern between different markets. The results show that dependencies, contagions and causalities between the four implied volatility index levels are strongly supported by the data in all copulas. From the dynamic and asymmetric analysis, the results indicate that the linkages between implied volatility indices are more pronounced when the indices rise.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Chen, Professor Cathy Yi-Hsuan |
| Authors: | Chen, C. Y.-H. |
| College/School: | College of Social Sciences > Adam Smith Business School > Accounting and Finance |
| Journal Name: | Asia-Pacific Journal of Financial Studies |
| Publisher: | Wiley |
| ISSN: | 2041-9945 |
| ISSN (Online): | 2041-6156 |
| Published Online: | 25 August 2014 |
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