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Volatility and return spillovers in Canadian and U.S. industry ETFs

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  • Krause, Timothy
  • Tse, Yiuman
Abstract
Exchange-traded funds (ETFs) are now an important source of information dissemination in Canadian and U.S. equity markets, and we provide new evidence regarding price discovery and volatility spillovers in these securities. We find that price discovery flows consistently from the U.S. to Canada for these securities, while volatility spillovers are largely bi-directional. Information is impounded more rapidly into returns through trading in U.S securities, and the combination of negative U.S. return spillovers and asymmetric volatility creates bi-directional volatility feedback effects. The results are relevant to market participants and Canadian market regulators since Canadian circuit-breakers are tied to U.S. market conditions.

Suggested Citation

  • Krause, Timothy & Tse, Yiuman, 2013. "Volatility and return spillovers in Canadian and U.S. industry ETFs," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 244-259.
    • Handle: RePEc:eee:reveco:v:25:y:2013:i:c:p:244-259
    DOI: 10.1016/j.iref.2012.07.009
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    More about this item

    Keywords

    Industrial structure; Industry ETF; Financial market integration; Volatility spillovers; Granger-causality;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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