Research On The Spillover Effect Based On Spectral Analysis Method

The spillover effect in financial markets is deemed as such a phenomenon that the volatility and its change always transmit from one market to one another.The volatility of one type of asset is not only affected by its historical performance,but also affected by the volatility of related asset in another market.Research in the volatility spillover effect would reveal the integration level of different markets,as well as the mechanism of risk transmission,which would help to optimize the construction of portfolio in order to spread the unsystematic risk.The paper chose the regional top enterprise indices of Shanghai stock market for studying samples.The research cover a period from September 27 th,2012 to January 5th,2018.With regard to the nonlinear and nongaussian characteristics in the real world financial time series,the research utilize some technics in random signal process,which contribute to the quantitative analysis of the time delay and impact level between two indices.The selected method prevails over the traditional econometric model due to the disparity between the assumption of traditional method and the actual condition.Besides,a sliding window approach is introduced to analyze the dynamic trends of concerned spillover effects.The results show that the extent of integration among the Bohai Surrounding Index,the Yangtse Delta Index and the Pearl Delta Index is high enough.While the Western Ares Index keeps a independent of the other indices,and the change in the volatility of Western Ares Index always take the lead.The quantitative method and its empirical results in this paper would help institutional investors to spread the risk in their domestic investments.Furthermore,the policy makers would also benefit from this research considerably.