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A variance spillover analysis without covariances: what do we miss?
Journal
Journal of International Money and Finance
ISSN
0261-5606
ISSN-Digital
1873-0639
Type
journal article
Date Issued
2015-03-01
Author(s)
Gisler, Katja
Abstract
We evaluate the relevance of covariances in the transmission mechanism of variance spillovers across the US stock, US bond and gold markets from July 2003 to December 2012. For that purpose, we perform a comparative spillover analysis between a model that considers covariances and a model that considers only variances. Our results emphasise the importance of covariances. Including covariances leads to an overall increase of the spillover level and detects the beginnings of the financial crisis and of the US debt ceiling crisis earlier than the spillover measure that considers only variances. Even for the low-dimensional system that we consider, one misses important variance spillover channels when covariances are excluded.
Language
English
Keywords
Covariance spillovers
lasso
spillover index
variance decomposition
variance spillovers
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Quantitative Economic Methods
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
51
Start page
174
End page
195
Pages
22
Subject(s)
Eprints ID
231528