Financial connectedness revisited: the role of Fama-French risk factors
- Authors
- Yang, Kisung; Kim, Myeong Hyeon; Kim, Young Min
- Issue Date
- Jun-2019
- Publisher
- ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
- Keywords
- Financial connectedness; global equity markets; risk factors; generalized forecasting error decomposition
- Citation
- APPLIED ECONOMICS LETTERS, v.26, no.10, pp.850 - 856
- Journal Title
- APPLIED ECONOMICS LETTERS
- Volume
- 26
- Number
- 10
- Start Page
- 850
- End Page
- 856
- URI
- http://scholarworks.bwise.kr/ssu/handle/2018.sw.ssu/38997
- DOI
- 10.1080/13504851.2018.1502864
- ISSN
- 1350-4851
- Abstract
- We study the contributions of Fama-French type risk factors to spillovers across global stock markets by combining the framework proposed by Diebold and Yilmaz(2009) with insights from asset pricing. We demonstrate that incorporating the risk factors absorbs approximately 40% of information from DY's total spillover measure to blur the boundaries between To' and From' countries and alleviates its upward trend. We find that the DY's spillover index after controlling for the risk factors yet fluctuates in accordance with historically important economic events over time. Last but not least, the stock market characteristics implied by risk factor exposures are revealed to play the crucial role in determining the Net spillover direction among global equity markets.
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Collections - College of Business Administration > School of Finance > 1. Journal Articles
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