Title: Subprime crisis and volatility spillover

Authors: Mouna Abdelhedi-Zouch, Mouna Boujelbene Abbes, Younes Boujelbene

Addresses: Faculty of Economics and Management of Sfax, University of Sfax, Tunisia, Cite Ennour, Rue 2031 Nº2, 3071 Sfax, Tunisie. ' Faculty of Economics and Management of Sfax, University of Sfax, Tunisia, Route Menzel Chaker, chez Tijeni Zegal, 3013 Sfax, Tunisie. ' Faculty of Economics and Management of Sfax, University of Sfax, Tunisia, Institut Superieur D'administration des affaires de Sfax, Route de l'aerodrome km 4, Sfax BP 1013 Sfax 3018, Tunisie

Abstract: The subprime financial crisis has sparked our interest in identifying channels through which US crisis spread across 20 developed and emerging stock markets. Empirical results of GARCH and EGARCH estimated models show a high persistence and asymmetric effect of volatility. Estimation of an augmented GARCH model indicates that the US current crisis spilled over American, European, Asian and Arabic financial markets. Interestingly, there are significant spillovers of volatility to Asian markets from UK and Swiss. Financial markets of Japan, Korea and especially Singapore constitute a channel through which crises are transmitted across global equity return.

Keywords: subprime crisis; volatility persistence; asymmetric effect; volatility spillover; developed markets; emerging markets; EGARH model; augmented GARCH model; financial crisis; stock markets.

DOI: 10.1504/IJMEF.2011.038266

International Journal of Monetary Economics and Finance, 2011 Vol.4 No.1, pp.1 - 20

Published online: 25 Jan 2011 *

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