A1731
Title: Volatility transmission in global energy markets: A Bayesian nonparametric approach
Authors: Martina Zaharieva - CUNEF Universidad (Spain) [presenting]
Audrone Virbickaite - CUNEF Universidad (Spain)
Andre Portela Santos - CUNEF Universidad (Spain)
Abstract: The volatility transmission in international energy markets is investigated by specifying a global trading day divided into three trading zones and involving measures of volatility spillovers and realized volatility as explanatory variables. The resulting multivariate GARCH framework is estimated by a highly flexible, semiparametric Bayesian framework, designed to deal with the forms of asymmetry and heavy tails found in financial time series. The empirical results suggest that the pattern of volatility interaction is a combination of effects both related to volatility in the same region and volatility in the region immediately preceding it. Furthermore, accounting for the fat-tailed behaviour not only improves dramatically the in-sample fit but also helps to uncover additional cross-market (or cross-country) effects and gives further insights into the exact channels through which energy shocks are transmitted throughout the world.
