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Volatility Spillovers between Stock and Bond Returns: Evidence from Nordic Countries

Thorstensson, Olof LU (2018) NEKN01 20181
Department of Economics
Abstract
This paper uses a bivariate BEKK model to estimate volatility spillover effects between stock
and bond markets for the Nordic countries Sweden, Denmark, Finland and Norway. Daily log
returns between the years 2001 and 2018 are analyzed. No spillover effect from the bond to
the stock market is found in any of the countries which is a result that is unusual compared to
a large part of the preexisting literature. Regarding spillover effects from the stock market to
the bond market, significant effects are found in Sweden, Denmark and Finland but not in
Norway. Volatility Impulse Response Functions (VIRFs) are computed to present the results
more intuitively. The VIRFs describe the effects on stock and bond markets after being hit by
a... (More)
This paper uses a bivariate BEKK model to estimate volatility spillover effects between stock
and bond markets for the Nordic countries Sweden, Denmark, Finland and Norway. Daily log
returns between the years 2001 and 2018 are analyzed. No spillover effect from the bond to
the stock market is found in any of the countries which is a result that is unusual compared to
a large part of the preexisting literature. Regarding spillover effects from the stock market to
the bond market, significant effects are found in Sweden, Denmark and Finland but not in
Norway. Volatility Impulse Response Functions (VIRFs) are computed to present the results
more intuitively. The VIRFs describe the effects on stock and bond markets after being hit by
a shock which originates from either of the markets. The main conclusions drawn from the
VIRFs are that a shock originating from the stock market has a persistent effect on bond
market volatilities and that stock market to bond market volatility spillovers are higher when
the financial markets are more unstable. (Less)
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author
Thorstensson, Olof LU
supervisor
organization
course
NEKN01 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
Volatility spillover, stocks, bonds, BEKK, Volatility Impulse Response Function
language
English
id
8958644
date added to LUP
2018-09-26 10:47:25
date last changed
2018-09-26 10:47:25
@misc{8958644,
  abstract     = {This paper uses a bivariate BEKK model to estimate volatility spillover effects between stock
and bond markets for the Nordic countries Sweden, Denmark, Finland and Norway. Daily log
returns between the years 2001 and 2018 are analyzed. No spillover effect from the bond to
the stock market is found in any of the countries which is a result that is unusual compared to
a large part of the preexisting literature. Regarding spillover effects from the stock market to
the bond market, significant effects are found in Sweden, Denmark and Finland but not in
Norway. Volatility Impulse Response Functions (VIRFs) are computed to present the results
more intuitively. The VIRFs describe the effects on stock and bond markets after being hit by
a shock which originates from either of the markets. The main conclusions drawn from the
VIRFs are that a shock originating from the stock market has a persistent effect on bond
market volatilities and that stock market to bond market volatility spillovers are higher when
the financial markets are more unstable.},
  author       = {Thorstensson, Olof},
  keyword      = {Volatility spillover,stocks,bonds,BEKK,Volatility Impulse Response Function},
  language     = {eng},
  note         = {Student Paper},
  title        = {Volatility Spillovers between Stock and Bond Returns: Evidence from Nordic Countries},
  year         = {2018},
}