Quantitative Easing and Volatility Spillovers across Countries and Asset Classes
Zihui Yang, Yinggang Zhou
Management Science
#002274 20160221 ()
We identify networks of volatility spillovers and examine time-varying spillover intensities with daily implied volatilities of US Treasury bonds, global stock indexes, and commodities. The US stock market is the center of the international volatility spillover network and its volatility spillover to other markets has intensified since 2008. Moreover, US quantitative easing alone explains 40% to 55% of intensifying spillover from the US. The addition of interest rate and currency factors does not diminish the dominant role of quantitative easing. Our findings highlight the primary contribution of US unconventional monetary policy to volatility spillovers and potential global systemic risk.
JEL-Codes: G01, G15, G32
Keywords: volatility spillover; risk neutral volatility; quantitative easing; systemic risk; financial network; structural VAR

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