Asymmetry in return and volatility spillover between China's interbank and exchange T-bond markets

Sukuk and conventional bonds gain their popularity in the global market. Hence, an observation of the dynamic correlation and transmission of volatility between these two instruments is relevant. This article investigates the volatility spillover of sukuk and conventional bond markets by using GARCH-BEKK model. Then, we measure the dynamics of the co-movement of both markets by using GARCH-DCC model, and finally, we examine the macroeconomic factors that determine the dynamic conditional correlation between sukuk and conventional bonds in two Association of Southeast Asian Nations (ASEAN) markets (i.e., Indonesia and Malaysia) and four Gulf Cooperation Council (GCC) markets (i.e., Kingdom of Saudi Arabia, UAE, Qatar and Oman). The data reveal unidirectional and bidirectional volatility spillovers of sukuk and bond indices. The results also show strong evidence of dynamic conditional correlation for all markets. On the basis of the BEKK and dynamic conditional correlation (DCC) results, we infer that bonds and sukuk in ASEAN and GCC markets show the efficiency of the markets, which do not offer any diversification benefits to investors for having both instruments in their portfolios. As regards portfolio diversification strategies, investors must pay attention to the co-movements and spillover of both markets accordingly. Finally, only Oman market is influenced by all macroeconomic variables.

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Asymmetry in return and volatility spillover between equity and bond markets in Australia

Pacific-Basin Finance Journal ◽

10.1016/j.pacfin.2009.09.003 ◽

2010 ◽

Vol 18 (3) ◽

pp. 272-289 ◽

Cited By ~ 38

Author(s):

Warren G. Dean ◽

Robert W. Faff ◽

Geoffrey F. Loudon

Keyword(s):

Bond Markets ◽

Volatility Spillover

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Volatility-Spillover Effects in European Bond Markets

European Financial Management ◽

10.1111/j.1468-036x.2007.00403.x ◽

2007 ◽

Vol 13 (5) ◽

pp. 923-948 ◽

Cited By ~ 96

Author(s):

Charlotte Christiansen

Keyword(s):

Spillover Effects ◽

Bond Markets ◽

Volatility Spillover

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Volatility Spillovers between Equity and Green Bond Markets

Sustainability ◽

10.3390/su12093722 ◽

2020 ◽

Vol 12 (9) ◽

pp. 3722 ◽

Cited By ~ 2

Author(s):

Daehyeon Park ◽

Jiyeon Park ◽

Doojin Ryu

Keyword(s):

Equity Markets ◽

Spillover Effects ◽

The Other ◽

Bond Markets ◽

Volatility Spillover ◽

Asymmetric Volatility ◽

Volatility Spillovers ◽

Financial Products ◽

Return Dynamics ◽

Positive Return

This study examines the market for green bonds, which have been in the spotlight as an eco-friendly investment product. We analyze the volatility dynamics and spillovers between the equity and green bond markets. As the return dynamics of financial products typically exhibit asymmetric volatility, we check whether green bonds also share this property. Our analyses confirm that although green bonds do exhibit the asymmetric volatility phenomenon, their volatility, unlike that of equity, is also sensitive to positive return shocks. An analysis of the association between the green bond and equity markets confirms that although the two markets have some volatility spillover effects, neither responds significantly to negative shocks in the other market.

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