*The Independence of Indexed Volatilities DOI: http://dx.doi.org/10.5772/intechopen.90240*

To model those spills [11], it was used a behavioural model that incorporated seven variables which had a 7 7 matrix. For reduced estimators, they used ordinary least squares (OLSs) model. Other methods used for Cholesky decomposition, alternative methodology for identification known as identification through heteroscedasticity (IH). They assume that structural shocks are uncorrelated and the matrix is stable for the entire. The latter principles are consistent with prior literature especially for ARCH and GARCH models. In presenting results [11], international transmission (i.e. direct effects and overall effects), response of the exchange rate and variance decomposition are shown. On international transmission, the direct effects show that spillovers are positive, both domestically and internationally. In those spills, the rise in foreign equity markets leads the spills. For overall effects, the key finding is that international transmissions are large for most assets but there are also international cross-market linkages. Moreover, the U.S. shocks led Euro shocks. Most of the co-movements were among the bond markets. Overall, the U.S. equity markets played a central role of influencing world stock markets. In relation to response of the exchange rate, the overall changes in relation to exchange rate reaction to bond yield changes are fairly small than direct effects. On the variance decomposition, during the 1989–2008 financial period, major spills were driven by the U.S. markets across every asset class in the study. The robustness tests support the earlier findings of the study. Thus, in global asset allocation one should mitigate against spills across most asset classes.
