Authors: Farrukh Javed
Addresses: Department of Statistics, Lund University, SE-220 07 Lund, Sweden
Abstract: In this paper, we empirically investigate and discuss the effects of jumps in data on causation pattern both in mean and variance. Our data consist of daily stock returns of four countries: France, Sweden, the UK and Finland. A test proposed by Cheung and Ng (1996) and Hong (2001) is applied for testing volatility spillover. We find significant evidence of jump spillover. It is shown that the presence of jump affects the transmission of information between two sets of series. Moreover, it is found that the choice of an appropriate model is essential for understanding the real pattern of transmission.
Keywords: causality; GARCH model; jumps; volatility spillover; jump spillover; causation patterns; stock returns; France; Sweden; UK; United Kingdom; Finland; modelling; financial crisis; time series; information transmission; correlated volatilities; stock markets.
International Journal of Computational Economics and Econometrics, 2013 Vol.3 No.3/4, pp.187 - 204
Received: 26 Nov 2012
Accepted: 19 Sep 2013
Published online: 31 Dec 2013 *