The Influence of Volatility Structural Changes on Shock Transmission and Volatility Spillover between Gold and Stock Markets in Iran

Subject Areas : Labor and Demographic Economics

zahra (mila) elmi ¹ , esmaiel aboonouri ² , saeed rasekhi ³ , mohamadmehdi shahrazi ⁴

1 - دانشیار دانشگاه مازندران
2 - استاد دانشگاه سمنان
3 - دانشیار دانشگاه مازندران
4 - دانشجوی دکتری مازندران

Received: 2014-02-26 Accepted : 2014-06-02 Published : 2014-09-01

Keywords: C32, C58, G10,

Abstract :

This study investigates the effect of volatility structural changes on the shock transmission and volatility Spillover between gold and stock markets in Iran during 2007-2013. For this purpose, firstly, we will detect the time periods of structural breaks in volatility of gold and stock returns endogenously using the standard and modified iterated cumulated sums of squares (ICSS) algorithm. Then, this information incorporates to model the volatility process. The application of bi-variate GARCH model in off-diagonal BEKK parameterization suggest that shock transmission and volatility spillover between gold and stock markets is bidirectional in Iran. Also, based on the present research findings, ignoring or incorrect detection of structural breaks mislead the researcher about the direction of volatility transmission between gold and stock markets.

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