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Within a Markov regime switching perspective, we examine the spillovers between the returns of the ten most representative US equity sectors and the returns of gold, oil, and S&P 500 (GOI), on the one hand, and their implied volatilities, GVZ, OVX, and VIX, on the other hand. Our objective is to check if the implied volatilities of GOI influence the US equity sectors more than GOI returns. Single regime results show that GOI volatilities affect the equity sector returns more than GOI returns, suggesting that forward-looking volatility expectations play a more significant role in determining sector returns than current and historical GOI returns. During tranquillity periods, all three implied volatilities influence equity sector returns more than GOI returns. Moreover, VIX has the strongest effect on sectoral returns. During turmoil periods, VIX influences the sectoral returns more than S&P 500 returns. However, the returns of gold and oil influence equity sector returns more than their implied volatilities. The result may be useful to portfolio and equity risk managers for improved forecasting and hedging in the US equity markets. [ABSTRACT FROM AUTHOR]

The multiple financial crises that occurred during the last two decades have stimulated scholars to investigate the cross‐market linkages and how shocks are transmitted across borders. Researchers usually examine financial contagion and its effects during a single period of study based on static models. This paper employs a regular vine copula specification to model the dependence dynamics across the G10 stock markets, by analysing the impacts during tranquillity periods and during each crisis episode studied apart. Empirical findings show significant differences in the connectedness, with distinctive shock transmission paths during every sub‐period. The results suggest a strong evidence of contagion during the global financial crisis and the European sovereign debt crisis. However, during the market downturn of 2002, there was no significant contagion due to the lack of market integration then. Besides, in the aftermath of the Brexit vote, Eurozone members took measures to reduce possible shock transmission and eliminate contagion. [ABSTRACT FROM AUTHOR]

This paper introduces a new class of tractable asymmetric heteroskedastic models, the good and bad volatility (GBV). Asymmetry is recognized in the dynamics of GBV components that correspond to positive and negative shocks respectively. The GBV model allows both conditional semivariances to evolve according to two separate functional forms with different semi‐definite distributions. An empirical application to six major index returns shows a fitting improvement over well‐known asymmetric volatility models in the financial literature. The model further leads to significant improvements in forecasting performance. The derived nontrivial news impact curves convey the dichotomy that asymmetry in financial returns has different dynamics for positive and negative shocks. [ABSTRACT FROM AUTHOR]