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Intraday industry-specific spillover effect in European equity markets

Intraday industry-specific spillover effect in European equity markets

Mateus, Cesario, Chinthalapati, Raju and Mateus, Irina B. (2016) Intraday industry-specific spillover effect in European equity markets. Quarterly Review of Economics and Finance, 63. pp. 278-298. ISSN 1062-9769 (doi:https://doi.org/10.1016/j.qref.2016.04.011)

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Abstract

This paper investigates the existence of financial contagion between the US and ten 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 five minutes 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.

Item Type: Article
Additional Information: © 2016. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords: Financial contagion; Consumer confidence index; European stock markets; Spillover effect
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Last Modified: 24 Apr 2018 00:38
Selected for GREAT 2016: None
Selected for GREAT 2017: GREAT a
Selected for GREAT 2018: None
Selected for GREAT 2019: None
URI: http://gala.gre.ac.uk/id/eprint/15008

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