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Signed spillover effects building on historical decompositions

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Dungey, M and Harvey, J and Siklos, P and Volkov, V (2017) Signed spillover effects building on historical decompositions. Discussion Paper. University of Tasmania, Hobart.

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Abstract

The spillover effects of interconnectedness between financial assets is decomposed into both sources of shocks and whether they amplify or dampen volatility conditions in the target market. We use historical decompositions to rearrange information from a VAR which includes sources, direction and signs of effects building on the unsigned forecast error variance decomposition approach of Diebold and Yilmaz (2009). A spillover index based on historical decompositions has simple asymptotic properties, permitting the derivation of analytical standard errors of the index and its components. We apply the methodology to a panel of CDS spreads of sovereigns and financial institutions for the period of 2003-2013 and identify how these entities contribute to global systemic risk.

Item Type: Report (Discussion Paper)
Keywords: Historical decomposition, DY Spillover, Granger Causality, Networks
Publisher: University of Tasmania
Copyright Information:

Copyright 2017 University of Tasmania

Additional Information:

JEL Classification Codes: C32, C51, C52, G10

Date Deposited: 28 Aug 2017 00:38
Last Modified: 09 Oct 2017 23:00
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