Revealing Volatility Spillover Effects Between CDS Premiums and Equity Markets in Developed and Developing Countries: VAR-BEKK-GARCH Model Approach

Mevlüt Camgöz

doi:10.5152/TBE.2022.221748

TR EN

Ülke CDS Primi ile Hisse Senedi Piyasası Arasındaki Oynaklık Yayılımları Gelişmiş ve Gelişmekte Olan Ülkelerde Farklılaşmakta mıdır? VAR-BEKK-GARCH Modeli Yaklaşımı

Öz

Bu çalışmada hisse senedi ve CDS (Kredi Temerrüt Swapı) piyasaları arasındaki oynaklık yayılımı etkileri VAR-BEKK-GARCH(1,1) modeli ile analiz edilmektedir. Piyasalar arasında yayılma etkisi olup olmadığı, varsa gelişmiş ve gelişmekte olan ülkelerde bu etkilerin farklılaşıp farklılaşmadığı ve piyasalar arasındaki korelasyon ilişkileri incelenmiştir. Genel olarak hisse senedi ve CDS piyasaları arasında çapraz şok geçişgenliğinin zayıf olduğu tespit edilmiştir. Yani hisse senedi ve CDS piya- sasında gözlemlenen oynaklık, çapraz şok geçişlerinden ziyade kendi geçmiş dönem şoklarından kaynaklanmaktadır. Hem hisse senedi hem de CDS piyasasındaki geçmiş dönem oynaklığının cari dönem koşullu oynaklığı üzerinde etkili olduğu anlaşılmaktadır. Ayrıca, genel olarak CDS piyasa- sından hisse senetleri piyasasına oynaklık yayılımı olmadığı tespit edilmiştir. Finansal piyasalarla ilgili haber akışı öncelikle hisse senedi piyasasında fiyatlanmakta, ardından CDS piyasasına yan- sımaktadır. CDS primleri ile hisse senedi endeksleri arasındaki korelasyon ve kovaryans ilişkileri zamana bağlı olarak değişim göstermektedir. Korelasyon ve kovaryans ilişkilerinin finansal piyasa- larda stres seviyesinin arttığı dönemlerde önemli değişimler gösterdiği gözlenmiştir.

Anahtar Kelimeler

Kredi Temerrüt Swapı , Hisse Senedi Piyasası , Oynaklık Yayılımı , VAR-BEKK- GARCH(1,1) modeli

Revealing Volatility Spillover Effects Between CDS Premiums and Equity Markets in Developed and Developing Countries: VAR-BEKK-GARCH Model Approach

Abstract

This study aims to analyze volatility spillover effects between stock and sovereign credit default swap (CDS) markets by adopting the VAR-BEKK-GARCH(1,1) model. The research questions can be expressed as follows. Does a significant volatility spillover exist between equity and CDS markets? Does a difference in volatility spillovers occur between developed and developing countries? Do the correlations between the stock market and CDS market differ in developed and developing coun- tries? The empirical findings demonstrate a weak cross-market spillover between the stock and CDS markets. In other words, the volatility observed in the stock and CDS markets is subject to past shocks more than cross-market spillovers. The lagged volatility in both stock and CDS markets has a substantial effect on the current period conditional volatility. In addition, no volatility spillovers were detected from the CDS market to the stock market. The information outflow about financial markets is priced initially in the stock market and then gets reflected onto the CDS market. The correlations and covariance relationships between CDS premiums and stock indices change over time. The cor- relations and covariance relationships show significant changes during periods of financial turmoil.

Keywords

Credit Default Swaps , Stock Market , Volatility Spillover , VAR-BEKK-GARCH(1,1) Model

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Details

Primary Language

English

Subjects

Economics

Journal Section

Research Article

Authors

Mevlüt Camgöz ^*
Türkiye

Publication Date

April 15, 2023

Submission Date

March 16, 2022

Acceptance Date

August 5, 2022

Published in Issue

Year 2023 Volume: 37 Number: 2

DOI

https://doi.org/10.5152/TBE.2022.221748

IZ

https://izlik.org/JA96ZA35JJ

APA

Camgöz, M. (2023). Revealing Volatility Spillover Effects Between CDS Premiums and Equity Markets in Developed and Developing Countries: VAR-BEKK-GARCH Model Approach. Trends in Business and Economics, 37(2), 98-110. https://doi.org/10.5152/TBE.2022.221748

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Content of this journal is licensed under a Creative Commons Attribution 4.0 International License

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