Asymmetries In Spillovers Research Articles

Energy transition metals and global sentiment: Evidence from extreme quantiles

This paper examines the quantile connectedness between energy transition metals, defined as those needed for the transition from dirty to clean energy, and global economic and financial sentiment benchmarks. Using data for five metals, - namely, aluminum, cobalt, copper, lithium, and nickel, - and two sentiment indices over 2019–2022, we empirically demonstrate that the US Economic Sentiment Index (ESI) and Societe Generale Global Sentiment Index (SGGSI) are found to be net receivers of shocks across all four extreme quantiles: 0.05, 0.10, 0.90, and 0.95. Thus, it is shown that energy transition metal markets impact global sentiment, especially during stressed periods. We also document that the total connectedness/risk spillovers between clean energy metals and sentiment indices exhibit substantial increase in the extreme quantiles. Moreover, we provide empirical evidence that there is asymmetry in spillovers over time and across quantiles.

Risk spillovers and time-varying links between international oil and China’s commodity futures markets: Fresh evidence from the higher-order moments

Existing studies of risk spillovers primarily examine returns and volatility but ignore higher-order moment risks and asymmetrical effects, thereby impeding portfolio optimization and risk management. This study addresses those scholarly deficiencies by investigating the realized higher-order moments (realized skewness and kurtosis) risk spillovers, and asymmetrical spillovers in volatility between WTI and Brent oil and China's commodities spanning 2006–2020. For robustness, we explore the spillovers in signed jump variations, realized hyper-skewness, hyper-kurtosis, and realized jump. Based on the DCC framework and the proposed MVHAR-RS/RK models, we propose a model to quantify the dynamic links in volatility and higher-order moments. Empirical results demonstrate that risk-connectedness varies under different moments. Alongside spillovers in realized volatility, analysis reveals significant spillovers in higher-order moment risks and captures the effects of asymmetries in spillovers of good and bad volatility. WTI and Brent oil act as the net transmitters of risk spillovers in all realized moments considered. The dynamic links in realized kurtosis are relatively more volatile and higher than volatility and skewness links. The dynamic risk spillovers under different realized moments and conditional correlations are time-varying and sensitive to major crises. These findings benefit investors and regulators concerned with cross-commodity risks, portfolio optimization, and policymaking.

COVID-19 and asymmetric volatility spillovers across global stock markets

In this study, I improve the assessment of asymmetry in volatility spillovers, and define six asymmetric spillover indexes. Employing Diebold-Yilmaz spillover index, network analysis, and my developed asymmetric spillover index, this study investigates the time-varying volatility spillovers and asymmetry in spillovers across stock markets of the U.S., Japan, Germany, the U.K., France, Italy, Canada, China, India, and Brazil based on high-frequency data from June 1, 2009, to August 28, 2020. I find that the global markets are well connected, and volatility spillovers across global stock markets are time-varying, crisis-sensitive, and asymmetric. Developed markets are the main risk transmitters, and emerging markets are the main risk receivers. Downside risk dominates financial contagion effects, and a great deal of downside risk spilled over from stock markets of risk transmitters into the global markets. Moreover, during the coronavirus recession, the total degree of volatility spillover is staying at an extremely high level, and emerging markets are the main risk receivers in the 2020 stock markets crash.

Dynamic asymmetric spillovers and volatility interdependence on China’s stock market

In this paper, we developed a novel measure to quantify the asymmetries in volatility spillovers, which emerge due to negative and positive shocks. Using high-frequency data of ten CSI 300 sector indices from 2007 to 2016, we employ our method to analyze the asymmetries in volatility spillover and volatility interdependence on China’s stock market at the sector level. We find that in general, the spillover from bad volatilities, which due to negative movements in returns, is considerably stronger than that from good volatilities due to positive returns. Except when the State Council of China announced the 4 trillion stimulus program in November 2008 and raised the total maximum QFII quota by $50 billion to $80 billion in April 2012, during which the good volatility dominated. Moreover, our empirical results reveal the asymmetric spillovers transmission mechanism. By decomposing the overall shock into macroeconomic shocks that affect all sectors and industrial shocks that only affect the specific sector, we found that rather than industrial shocks, the macroeconomic shocks dominate the asymmetries in spillover transmission.

Asymmetric risk spillovers between oil and agricultural commodities

Increase in agricultural commodities’ prices not only increases economic and social costs, it may also affect health, education and family ties. The dependence and risk transmission between oil prices and the price of agricultural commodities is subject to possible symmetric or asymmetric changes due to legislation in the farm sector in recent times. The objective of this study is to understand the extent to which oil as a global economic factor influences the price behavior of agricultural commodities such as wheat, maize, soybeans, and rice under adverse and prosperous market scenarios. We find evidence of symmetry in the tail dependence between variables, and of asymmetry in the spillovers from oil to agricultural commodities that intensify during financial turmoil. Policymakers and traders of agricultural commodities may benefit by considering the identified asymmetries in co-movements and risk spillovers.

Asymmetry in spillover effects: Evidence for international stock index futures markets

The paper investigates the asymmetry in return and volatility spillovers across futures markets with non-overlapping stock exchange trading hours. The transmission of positive and negative return and volatility shocks is analysed for 104 channels of information conveyance identified by combining 9 developed and 11 emerging markets in markets pairs with non-overlapping trading hours. The asymmetric causality test is employed to daily stock index futures returns and volatilities for the period from 03 October 2010 to 03 October 2014. The paper sheds light on the relatively little explored concept of asymmetry in return and volatility spillovers across markets, providing novel evidence on stabilizing and destabilizing spillover effects.

Asymmetric volatility connectedness on the forex market

We show how bad and good volatility propagate through the forex market, i.e., we provide evidence for asymmetric volatility connectedness on the forex market. Using high-frequency, intra-day data of the most actively traded currencies over 2007–2015 we document the dominating asymmetries in spillovers that are due to bad, rather than good, volatility. We also show that negative spillovers are chiefly tied to the dragging sovereign debt crisis in Europe while positive spillovers are correlated with the subprime crisis, different monetary policies among key world central banks, and developments on commodities markets. It seems that a combination of monetary and real-economy events is behind the positive asymmetries in volatility spillovers, while fiscal factors are linked with negative spillovers.

Asymmetric Volatility Connectedness on Forex Markets

We show how bad and good volatility propagate through forex markets, i.e., we provide evidence for asymmetric volatility connectedness on forex markets. Using high-frequency, intra-day data of the most actively traded currencies over 2007 -- 2015 we document the dominating asymmetries in spillovers that are due to bad rather than good volatility. We also show that negative spillovers are chiefly tied to the dragging sovereign debt crisis in Europe while positive spillovers are correlated with the subprime crisis, different monetary policies among key world central banks, and developments on commodities markets. It seems that a combination of monetary and real-economy events is behind the net positive asymmetries in volatility spillovers, while fiscal factors are linked with net negative spillovers.

Volatility Spillovers Across Petroleum Markets

By using our newly defined measure, we detect and quantify asymmetries in the volatility spillovers of petroleum commodities: crude oil, gasoline, and heating oil. The increase in volatility spillovers after 2001 correlates with the progressive fin-ancialization of the commodities. Further, increasing spillovers from volatility among petroleum commodities substantially change their pattern after 2008 (the financial crisis and advent of tight oil production). After 2008, asymmetries in spillovers markedly declined in terms of total as well as directional spillovers. In terms of asymmetries we also show that overall volatility spillovers due to negative (price) returns materialize to a greater degree than volatility spillovers due to positive returns. An analysis of directional spillovers reveals that no petroleum commodity dominates other commodities in terms of general spillover transmission.

Volatility Spillovers Across Petroleum Markets

By using our newly defined measure, we detect and quantify asymmetries in the volatility spillovers of petroleum commodities: crude oil, gasoline, and heating oil. The increase in volatility spillovers after 2001 correlates with the progressive fin-ancialization of the commodities. Further, increasing spillovers from volatility among petroleum commodities substantially change their pattern after 2008 (the financial crisis and advent of tight oil production). After 2008, asymmetries in spillovers markedly declined in terms of total as well as directional spillovers. In terms of asymmetries we also show that overall volatility spillovers due to negative (price) returns materialize to a greater degree than volatility spillovers due to positive returns. An analysis of directional spillovers reveals that no petroleum commodity dominates other commodities in terms of general spillover transmission.

Volatility Spillovers Across Petroleum Markets

We detect and quantify asymmetries in the volatility spillovers of petroleum commodities: crude oil, gasoline, and heating oil. The increase in volatility spillovers after 2001 correlates with the progressive financialization of the commodities. Further, increasing spillovers from volatility among petroleum commodities substantially change their pattern after 2008 (the financial crisis and advent of tight oil production). After 2008, asymmetries in spillovers markedly declined in terms of total as well as directional spillovers. In terms of asymmetries we also show that overall volatility spillovers due to negative (price) returns materialize to a greater degree than volatility spillovers due to positive returns. An analysis of directional spillovers reveals that no petroleum commodity dominates other commodities in terms of general spillover transmission.

How Does Bad and Good Volatility Spill Over Across Petroleum Markets?

We detect and quantify asymmetries in volatility spillovers using the realized semivariances of petroleum commodities: crude oil, gasoline, and heating oil. During the 1987-2014 period we document increasing spillovers from volatility among petroleum commodities that substantially change after the 2008 financial crisis. The increase in volatility spillovers correlates with the progressive financialization of the commodities. In terms of asymmetries in spillovers we show that periods of increasing crude oil prices strongly correlate with dominating spillovers due to bad volatility. Overall, bad volatility due to negative returns spills over among petroleum commodities to a much larger extent than good volatility due to positive returns. After the 2008 financial crisis the asymmetries in spillovers markedly declined in terms of total as well as directional spillovers. An analysis of directional spillovers further reveals that no commodity dominates other commodities in terms of spillover transmission in general.

Leader, Follower: Strategic Investments with Asymmetric Spillovers

This paper analyzes the strategic incentives of first and second movers in sequential investment games with Stackelberg competition and price leadership on the output market. The study shows that the follower can invest more than the leader when the outgoing spillover from the leader to the follower is sufficiently high, taking into account the outgoing spillover of the follower. This result tends to apply in quantity and price settings. It is also shown that when externalities have opposite signs, the firm with the lowest outgoing spillover is investing most. However, with externalities that have the same sign, the asymmetry of spillovers determines who invests most. A beginning is made with the investigation of the robustness of the tendencies reported.