FMC2/MACSI Colloquium. A MEM-based Analysis of Volatility Spillovers in European Financial Markets. Lena Golubovskaja NUI Maynooth. Contents. 1. Introduction. 2. Theoretical Developments. The MEM Models. 3. Empirical Results. 4. Analysis of Volatility.
The MEM Models
Source: Árvai, Driessen, and Ötker-Robe (2009)
The relationships between the U.S. and European Stock Price Ranges
2001/02 – 2007/06
2007/07 – 2010/01
A: Entire Period
Whether volatility spillover effect exist between the European markets?
Do we have a symmetric or assymetric volatility mechanism among the markets?
Who is the main volatility transmitter during the subprime mortgage crisis?
Parkinson (1980) showed that that the range is an unbiased estimator of the volatility parameter in a diffusion process. The intuition behind his finding is that the price range of intraday gives more information regarding the future volatility than two arbitrary points in this series (the closing prices).
Can we use this information to measure volatility better?
- the return of stock i at time t-1.
- a dummy variable to test the leverage effect.