Analyzing the Network Structure of Spillover Connectedness Across Index Futures Markets During Market Distress Periods

Abstract

This paper aims to investigate the network structure of connectedness among global index futures markets in different distress periods. In this purpose, this employs the multivariate DECO-GARCH model of Engle and Kelly (2012) and the spillover index method of Diebold and Yilmaz (2014). From empirical analysis, this paper finds an evidence of a positive equicorrelation among global index futures, implying the contagion effect in global index futures markets. The spillover connectedness is intensified due to recent market distress, i.e., the 2008-2009 GFC, the 2010-2012 ESDC, the collapse of Chinese stock market in 2015, and the US FRB interest rate hike in 2018. Further, this paper measures the direction and strength of volatility connectedness assessed by the net pairwise directional spillover indexes. Thus this paper identifies the net spillover connectedness (transmitter/receiver) across global index futures markets. Finally, this paper shows the network structure of spillover connectedness in different market distress periods, and provides the channels of spillover connectedness across global index future markets.

Citation

Kang, S.H. (2019), "Analyzing the Network Structure of Spillover Connectedness Across Index Futures Markets During Market Distress Periods", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 27 No. 2, pp. 141-164. https://doi.org/10.1108/JDQS-02-2019-B0001