Spatio‑Temporal Analysis of the Phenomenon of Volatility Transfer Between the Markets Representing Different Assets Classes with Regard to the Changes of the Crude Oil Prices in the Period of 2000–2015

Abstract

In the face of the numerous turbulence on the global financial markets the need for a more profound look at the phenomenon of volatility transfer between different markets increases because as a consequence of this phenomenon the increase in volatility in one market may lead to the appearance of an increased volatility on another. In the case of these relationships spatial displacement can also be observed, consisting in reactions of the market in one country on the changes taking place in other markets in other countries. In this approach, the analysis is carried out on the assumption that the markets are located in a metric space, where the relationship between the variables describing these markets are the functions of the physical or more likely economic distance between them. The aim of this article is to determine whether, in the context of the phenomenon of the price volatility transfer between different assets classes, a certain spatial relationships between them could be disclosured. Subsequently, in case of occurrence of supposed dependences, an attempt to identify the possible spatial relationships between the market in one country and markets located in the neighboring countries was made. To identify the spatial relationships dynamic spatial panel models were introduced. The research includes the markets of equities, bonds and foreign exchange markets representing selected countries in Europe and Asia in the period of 2000–2015.