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Does the Spillover Index Respond to Adverse Shocks? A Bootstrap-Based Probabilistic Analysis

Author

Listed:
  • Matthew Greenwood-Nimmo
  • Evžen Kocenda
  • Viet Hoang Nguyen
Abstract
The spillover index developed by Diebold and Yilmaz (Economic Journal, 2009, vol. 119, pp. 158–171) is widely used to measure connectedness in economics and finance. Abrupt increases in the spillover index are thought to result from major economic and financial events, but formal evidence of this relationship is scarce. We develop a bootstrap-based technique to evaluate the probability that the value of the spillover index changes following an exogenously defined event. We revisit the original dataset from Diebold and Yilmaz and obtain qualified support for their finding that the spillover index increases in a timely manner in the wake of the adverse shocks.

Suggested Citation

  • Matthew Greenwood-Nimmo & Evžen Kocenda & Viet Hoang Nguyen, 2023. "Does the Spillover Index Respond to Adverse Shocks? A Bootstrap-Based Probabilistic Analysis," CESifo Working Paper Series 10668, CESifo.
    • Handle: RePEc:ces:ceswps:_10668
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10668.pdf
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    Cited by:

    1. Albrecht, Peter & Kočenda, Evžen, 2024. "Volatility connectedness on the central European forex markets," International Review of Financial Analysis, Elsevier, vol. 93(C).

    More about this item

    Keywords

    spillover index; adverse shocks; influential events; bootstrap-after-bootstrap procedure;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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