Risk Spillover Between the GIPSI Economies and Egypt, Saudi Arabia, and Turkey

ABSTRACT

In this article, we examine the upside and downside risk spillover effects between the GIPSI economies (Greece, Ireland, Portugal, Spain, and Italy) and Egypt, Saudi Arabia, and Turkey using a kernel-based test as proposed by Hong et al. (2009). The results reveal that there exists a two-way as well as one-way downside risk spillover for most of the pairs between the GIPSI economies and Egypt, Saudi Arabia, and Turkey. However, we find significant two-way upside risk spillover effects between Egypt and Ireland, Italy, and Spain. The one-way upside risk spillover is significant only from Ireland, Italy, and Spain to Egypt.

KEY WORDS:

• downside risk spillover
• ICSS algorithm
• TGARCH model
• upside risk spillover
• value at risk (VaR)

ORCID

Dilip Kumar

http://orcid.org/0000-0003-4858-8440

Notes

1. We make use of weekly observations because daily observations may be associated with the biases due to nontrading, the bid-ask spread, and asynchronous prices as suggested by Lo and MacKinlay (1988).

2. The results are not shown here but are available on request.

3. The coefficient estimates of volatility-break dummies are not shown in the table because the goal here is to analyze the effect of sudden changes in volatility on volatility persistence (α + β).