1. bookVolume 8 (2019): Issue 3 (September 2019)
Journal Details
License
Format
Journal
eISSN
2336-9205
First Published
11 Mar 2014
Publication timeframe
3 times per year
Languages
English
access type Open Access

Volatility Spillovers between Interest Rates and Equity Markets of Developed Economies

Published Online: 19 Sep 2019
Volume & Issue: Volume 8 (2019) - Issue 3 (September 2019)
Page range: 39 - 50
Received: 22 Feb 2018
Accepted: 22 Jun 2018
Journal Details
License
Format
Journal
eISSN
2336-9205
First Published
11 Mar 2014
Publication timeframe
3 times per year
Languages
English
Abstract

This study employs the recently developed Lagrange multiplier-based causality-in-variance test by Hafner and Herwartz (2006), to determine the volatility spillovers between interest rates and stock returns for the US, the euro area, the UK, and Japan. The investigation pays careful attention to volatility transmissions between stock returns and interest rates before and after these economies reached the Zero Lower Bound (ZLB), which is permitted via the use of Shadow Short Rates (SSR), used as a proxy for monetary policy decisions. The results based on daily data imply that while bidirectional causality is observed, the volatility spillover from interest rates to stock markets are more prominent for the full-sample, as well as the sub-samples covering the pre- and during-ZLB periods.

Keywords

JEL Classification

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