Volatility Spillovers across Major Equity Markets of Americas

This paper investigates the daily volatility spillovers between Standard and Poor's 500, and equity indices of Brazil, Argentina, and Mexico for the period of August 2007 through August 2012. We find that equity indices under study exhibit nonlinear dependencies, inconsistent with chaotic structure. Bivariate GARCH estimations indicate bi-directional spillovers. Findings show evidence of asymmetric market responses to shocks in all markets. Therefore, we estimate asymmetric bivariate EGARCH models. We find evidence of leverage effect as positive and negative shocks to each market impart unequal impact on the volatility of the other market. Furthermore, effects of negative shocks are much more pronounced than positive shocks. Finally, the non-linear Granger causality test results confirm that markets of Americas cause one another, i.e., there is shock feedback.