Range-Based Analysis of Volatility Spillovers in European Financial Markets

We analyze multivariate time series of daily high-low ranges of national equity market indices to measure intra-daily volatility dynamics across four continental European markets. We use a dynamic linear model of expected daily range which is a variant of Chou’s conditional autoregressive range model. We find significant, but not uniform, range-based volatility spillovers between the European markets. The strongest spillover comes from the previous day’s realized range of the US market index. We also find that average daily range increased sharply during the European financial crisis, and the degree of autoregressive persistence also increased uniformly.