Assessing Spillover Dynamics: A Diagonal BEKK GARCH Analysis of Interactions Among the Crypto Market and Systemically Significant Industries with a Historical Nexus to Financial Crises

The primary objective of this paper is to scrutinize the presence and extent of volatility transmissions within markets that have historically played pivotal roles in financial crises-specifically, the financial services, technology, real estate, and cryptocurrency markets. A mathematical deduction from the origin of ARCH and GARCH model series is introduced to help understand the underlying ideas of analysis methodologies used in the paper. The analysis spans both the prelude to and during the latest financial turmoil, employing daily returns of stock market indexes from December 1, 2017, to December 1, 2023, and applying the Conditional Mean Return and Diagonal BEKK GARCH methodologies. The empirical findings highlight the existence of significant volatility spillover effects across the four markets, yet these spillovers are not uniform across the respective pairs. Notably, the results reveal substantial GARCH effects coupled with relatively low ARCH effects. In the end, the spillover effects concluded by the analysis are verified existed through public news resources.