Examining Dynamic Interdependencies Among Major Global Financial Markets
Multinational Finance Journal, 2019, vol. 23, no. 1/2, pp. 103–139
Sanjay Sehgal, University of Delhi, India
Sakshi Saini, Institute of Economic Growth, India
Florent Deisting, Groupe ESC Pau, France
Abstract:
This paper investigates dynamic interdependencies among major global financial markets from January 1999 to April 2017 by examining their risk and return spillovers. Risk and return interactions are also analyzed within the sample markets. Using block-aggregation technique under the Diebold-Yilmaz framework, strong information linkages are observed among the global equity markets that intensify during the crisis period. Results establish the dominance of the US in the global financial system based on information linkages. Further, systematic factors are found to be more prevalent in spillovers among return and volatility as compared to idiosyncratic factors. With regards to interaction between risk and return, results reveal return spillovers of high magnitude onto risk and almost negligible risk spillovers onto return. These findings have important implications for international investors and policymakers.
Keywords:
Financial markets; Diebold and Yilmaz; spillovers; conditional volatility.
Citation (APA):
Sehgal, S., Saini, S., & Deisting, F. (2019). Examining dynamic interdependencies among major global financial markets. Multinational Finance Journal, 23(1/2), 103–139.
Citation (Harvard):
Sehgal, S., Saini, S. and Deisting, F., 2019. Examining Dynamic Interdependencies Among Major Global Financial Markets. Multinational Finance Journal, 23(1/2), pp.103–139.