0000000000287254
AUTHOR
Francesco Caloia
Asymmetric semi-volatility spillover effects in EMU stock markets
Abstract The aim of this paper is to quantify the strength and the direction of semi-volatility spillovers between five EMU stock markets over the 2000–2016 period. We use upside and downside semi-volatilities as proxies for downside risk and upside opportunities. In this way, we aim to complement the literature, which has focused mainly on the contemporaneous correlation between positive and negative returns, with the evidence of asymmetry also in semi-volatility transmission. For this purpose, we apply the Diebold and Yilmaz (2012) methodology, based on a generalized forecast error variance decomposition, to downside and upside realized semi-volatility series. While the analysis of Diebol…
How do normalization schemes affect net spillovers? A replication of the Diebold and Yilmaz (2012) study
Abstract This paper replicates the Diebold and Yilmaz (2012) study on the connectedness of the commodity market and three other financial markets: the stock market, the bond market, and the FX market, based on the Generalized Forecast Error Variance Decomposition, GEFVD. We show that the net spillover indices (of directional connectedness), used to assess the net contribution of one market to overall risk in the system, are sensitive to the normalization scheme applied to the GEFVD. We show that, considering data generating processes characterized by different degrees of persistence and covariance, a scalar-based normalization of the Generalized Forecast Error Variance Decomposition is pref…