The integration of financial markets across countries has modified the way prices react to news. Innovations originating in one market diffuse to other markets following patterns which usually stress the presence of interdependence. In some cases, though, covariances across markets have an...

The literature on Markov switching models is increasing and producing interesting results both at theoretical and applied levels. Most often the number of regimes, i.e., of data generating processes, is considered known; this strong hypothesis is adopted to somewhat bypass the nuisance parameter...

In this paper we suggest ways to characterize the transmission mechanisms of volatility between markets by making use of a new Markov Switching bivariate model where the state of one variable feeds into the transition probability of the state of the other. The comparison between this model and...

The transmission mechanisms of volatility between markets can be characterized within a new Markov Switching bivariate model where the state of one variable feeds into the transition probability of the state of the other. A number of model restrictions and hypotheses can be tested to stress the...