Price and volatility spillovers across North American, European and Asian stock markets

This paper examines price and volatility spillovers across North American, European and Asian stock markets. The return spillover is modeled through VAR(15) in which fifteen world indices, representative of their stock market are considered. The effect of same day return in explaining the return spillover is also analyzed using VAR and AR with exogenous variables. Volatility spillover is modeled through AR-GARCH incorporating the same day effect. In both return and volatility spillover, it is found that a particular index is mostly affected by the indices which open/close just before it. It is also found that there is a greater regional influence among Asian and European stock markets. Our paper contributes to the literature by including markets that span the whole time line and also modeling the same day effect with simultaneity preserved where required. Given the evidence, the results can be generalized for the other markets that were not included.