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Intraday industry-specific spillover effect in European equity markets

Intraday industry-specific spillover effect in European equity markets
Intraday industry-specific spillover effect in European equity markets
This paper investigates the existence of financial contagion between the US and 10 European stock markets. Using intraday minute-per-minute data of a large set of 374 equities from three different industries, over the period from January to June 2011, we investigate the impact of increased volatility in the US on the inter-country industry-level spillover effect. Self-built industry indices are used, which allows the implementation of the same index methodology across different markets. We first show that the spillover of asset price volatility from the US to European markets does exist; the greatest spike in the volatility in the target markets is observed in the first minute, and is absorbed in the first 5 min after the volatility increase. Second, we can state that euro-denominated markets amplify the spillover effect of volatility from the US market. Third, we provide evidence of the industry heterogeneity of the spillover effects, and claim that an analysis of financial contagion across different industries is desirable, using industry indices instead of global market indices.
1062-9769
278-298
Mateus, Cesario
e05a0662-e701-4588-8f0f-0b959899636e
Chinthalapati, Raju
65ec749f-9695-4550-a408-93c649f807af
Mateus, Irina
01debe08-509b-449d-8b3d-7e9c7deb7990
Mateus, Cesario
e05a0662-e701-4588-8f0f-0b959899636e
Chinthalapati, Raju
65ec749f-9695-4550-a408-93c649f807af
Mateus, Irina
01debe08-509b-449d-8b3d-7e9c7deb7990

Mateus, Cesario, Chinthalapati, Raju and Mateus, Irina (2016) Intraday industry-specific spillover effect in European equity markets. Quarterly Review of Economics and Finance, 278-298. (doi:10.1016/j.qref.2016.04.011).

Record type: Article

Abstract

This paper investigates the existence of financial contagion between the US and 10 European stock markets. Using intraday minute-per-minute data of a large set of 374 equities from three different industries, over the period from January to June 2011, we investigate the impact of increased volatility in the US on the inter-country industry-level spillover effect. Self-built industry indices are used, which allows the implementation of the same index methodology across different markets. We first show that the spillover of asset price volatility from the US to European markets does exist; the greatest spike in the volatility in the target markets is observed in the first minute, and is absorbed in the first 5 min after the volatility increase. Second, we can state that euro-denominated markets amplify the spillover effect of volatility from the US market. Third, we provide evidence of the industry heterogeneity of the spillover effects, and claim that an analysis of financial contagion across different industries is desirable, using industry indices instead of global market indices.

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More information

Accepted/In Press date: 15 April 2016
e-pub ahead of print date: 23 April 2016
Published date: 2016

Identifiers

Local EPrints ID: 431406
URI: http://eprints.soton.ac.uk/id/eprint/431406
ISSN: 1062-9769
PURE UUID: e7648200-5438-47aa-b9d1-b45c75f64914

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Date deposited: 31 May 2019 16:30
Last modified: 27 Apr 2022 11:24

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Contributors

Author: Cesario Mateus
Author: Irina Mateus

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