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    VOLATILITY TRANSMISSION BETWEEN U.S. SECTOR ETFs: AN APPLICATION OF DIEBOLD-YILMAZ CONNECTEDNESS FRAMEWORK Van Hau Nguyen A thesis submitted to Auckland University of Technology in partial fulfilment of the requirements for the degree of Master of Business (MBus) Faculty of Business and Law 1   September, 2015    1 TABLE OF CONTENTS LIST OF FIGURES  ........................................................................................................ 3 LIST OF TABLES  .......................................................................................................... 4 ATTESTATION OF AUTHORSHIP  ........................................................................... 5 ACKNOWLEDGEMENT  .............................................................................................. 6 ABSTRACT  ..................................................................................................................... 7 I.   INTRODUCTION  ................................................................................................... 8 II.   LITERATURE REVIEW  ..................................................................................... 10 III.   DATA & METHODOLOGY  ............................................................................ 16 1.   DATA  .................................................................................................................. 16 2.   METHODOLOGY  ............................................................................................. 18 2.1. Realized Variances ....................................................................................... 18 2.2. Generalized Vector Autoregressions ............................................................ 18 IV.   EMPIRICAL RESULTS  ................................................................................... 22 1.   PRELIMINARY TESTS  ................................................................................... 22 1.1. Descriptive Statistics..................................................................................... 22 1.2. Stationary Tests............................................................................................. 23 1.3. Pairwise Granger Causality Tests ................................................................. 23 2.   STATIC (FULL SAMPLE, UNCONDITIONAL) ANALYSIS  ..................... 25 3.   DYNAMIC ANALYSIS  ..................................................................................... 28 3.1 Rolling Total Volatility Spillover ................................................................. 28 3.2. Rolling Total Directional Volatility Spillover .............................................. 47 3.3. Rolling Net Total Directional Volatility Spillover ....................................... 52 3.4. Rolling Net Pairwise Directional Volatility Spillover .................................. 69 V.   CONCLUSIONS  .................................................................................................... 74 VI.   REFERENCES  ................................................................................................... 76 VII.   APPENDIX  ......................................................................................................... 79    2 1.   FIGURES  ............................................................................................................ 79 Figure 1. Daily U.S. Sector ETFs Volatility ............................................................ 79 Figure 2. Total Volatility Spillover.......................................................................... 81 Figure 3. Total Directional Volatility Spillover from the Others to Each of Ten Sectors ...................................................................................................................... 84 Figure 4. Total Directional Volatility Spillover to the Others from Each of Ten Sectors ...................................................................................................................... 86 Figure 5. Net Total Directional Volatility Spillover ................................................ 88 Figure 6. Net Pairwise Directional Volatility Spillover .......................................... 90 2.   TABLES  .............................................................................................................. 96 Table 1.1: ETFs Information ................................................................................... 96 Table 1.2: ETFs Information (Continued) ............................................................... 96 Table 2: Volatility Descriptive Statistics ................................................................. 98 Table 3.1: ADF Test with Trend and Intercept in Test Equation ............................ 99 Table 3.2: ADF Test with Intercept in Test Equation .............................................. 99 Table 3.3: ADF Test with None in Test Equation ................................................... 99 Table 4. Pairwise Granger Causality Tests ............................................................ 101 Table 5.1: Full Sample Volatility Spillover Table ................................................. 103 Table 5.2: Full Sample Net Pairwise Directional Volatility Spillover Table ........ 103      3 LIST OF FIGURES Figure 1. Daily U.S. Sector ETFs Volatility Figure 2. Total Volatility Spillover Figure 3. Total Directional Volatility Spillover from the Others to Each of Ten Sectors Figure 4. Total Directional Volatility Spillover to the Others from Each of Ten Sectors Figure 5. Net Total Directional Volatility Spillover Figure 6. Net Pairwise Directional Volatility Spillover

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