In this paper, we compute the Baruník and Baruník (2018) spillover asymmetric measure (the SAM hereinafter) to explain the difference between good and bad risk transmissions in a system of three strategic markets: the oil market, the gold market, and the US equity market. To get consistent and responsive volatility estimates, we compute the realized volatilities at the 5-min returns frequency of the future prices of the three asset classes. The results from the obtained sample indicate that daily bad volatilities transmit more risk information than daily good volatilities. Interestingly, these asymmetries in the transmission mechanism are found to increase after a progressive deterioration in the US business environment and/or in the economic policy uncertainty of the US economy. Hence, we conclude that the day-to-day changes in policy uncertainty and economic activity in the US are important and should be accounted for in risk transmission, risk forecasting, asset pricing, and portfolio diversification.
|Number of pages||17|
|Publication status||Published - 1 Dec 2022|