VOLATILITY SPILLOVER: DYNAMIC REGIONAL AND WORLD EFFECTS
Ming-Chieh WangNational Chi Nan University, TW.
Feng-Ming ShihNational Chi Nan University, TW.
This paper investigates the dynamic nature and determinants of volatility spillovers from European region and world to the five emerging European equity markets that are not members of the European Monetary Union. Using a multi-factor model with time-varying loadings estimated in three stages, our results show significant world and regional effects on volatility. The influence of economic determinants on the regional effect seems to be greater than that on the world effect. Furthermore, this study provides evidence that economic growth and exchange rate can predict the volatility spillover intensities in the Czech Republic, Hungary, and Poland as well as in the developed European region, by controlling the variables of foreign capital flows and trade. World effect on region becomes stronger when the world and European region are simultaneously in recession.
Key words: volatility spillover, economic growth, exchange rate
JEL code: G12; G15