Risk spillover and dynamics between financial markets, commodity markets and digital currencies with the MGARCH method
Subject Areas : Financial engineering
Hamid Mohammadishad
1
,
Mahdi Madanchi Zaj
2
,
Amir Reza Keyghobadi
3
1 - Department of Financial Management, Science and Research Branch, Islamic Azad University, Tehran, Iran
2 - Department of Financial Management, Electronic Campus, Islamic Azad University, Tehran, Iran
3 - Department of Accounting, Central Tehran Branch, Islamic Azad University. Tehran, Iran
Keywords: MGARCH, Financial Risk, Spillover, Commodity Market, Digital Currencies,
Abstract :
Risk spillover between financial assets indicates the process of information transfer between markets. Financial markets are related, information created in one market can affect other markets. Risk modeling in different markets and the relationship between these markets are important for forecasting. The purpose of this paper was to investigate the spillover and dynamics of risk between commodity markets, financial markets and digital currencies using the multivariate generalized autoregressive conditional heteroskedasticity (MGARCH) method in the period 2020-2014 with the frequency of daily data. The results of this study indicate the spillover of fluctuations between financial markets and the ratio of dollar to euro and bitcoin had a negative and significant relationship with each other, but other financial assets had a positive and significant relationship in terms of returns and fluctuations. Additionally the stability, the trend of changes in oil and gold prices leads to an important relationship between returns and strengthens the transfer of risk between the foreign exchange market, virtual money, oil and gold. Finally, the research model shows the intensity of contagion between financial markets in the context of small and large shocks, which indicates the existence of asymmetric effects on risk overflow between important financial markets.
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