Return & Volatility Spillovers into the AEX

This paper examines the return and volatility spillover effects of the DAX 30, FTSE 100, Nikkei 225, Hang Seng Index (HSI) and S&P 500 into the AEX return and volatility using a daily return sample from January 1990 until December 2018. The return spillover effects are analysed using a 3-dimension VAR(1) and the volatility spillover effects are examined using a two step AR(1)-GARCH(1,1) procedure. Not enough evidence is found to support that the return spillover effects have increased with time, however, in accordance with past research, the volatility spillover effects are found to increase throughout the sample. In agreement with literature, the volatility spillover effects are found to be asymmetric; negative return periods lead to larger volatility spillovers. Additionally, it is found that the market opening closest to the AEX, namely the HSI, has significantly larger return spillover effects. Lastly, as concluded by previous literature, the one day lagged return and shocks from the S&P 500 are found to have large return and volatility spillover effects into the AEX.