Description:
This paper uses a Multiplicative Error Model (MEM) framework to investigate the asymmetric volatility spillovers among four major global asset markets: stock, bond, gold, and crude oil. It provides evidence that those spillovers are influenced by different events and economic conditions that vary across time. It identifies markets that are net providers and net takers of spillovers in each market. Specifically, we find that the stock market is the net provider, while the bond and gold markets play a mixed role. We also show that the spillover effects are mostly negative for the stock and crude oil markets and mostly positive for the bond market. We further shed light on the role of safe-haven assets at times of market turmoil by showing that these assets can play a significant role in mitigating spillover effects and providing investors with hedging opportunities. These findings have important implications for investors, who are seeking to manage risks, and policymakers, who are interested in stabilizing the markets. Keywords: asymmetric volatility spillovers, global asset markets, Multiplicative Error Model (MEM), spillover balance index