VOLATILITY SPILLOVERS BETWEEN THE SWEDISH EQUITY MARKET AND ITS DERIVATIVES MARKET

Abstract

This thesis explores volatility spillovers and correlation between the OMXS30 spot and futures markets from January 2020 to December 2024 using a combined VAR and DCC-GARCH approach. Looking at the baseline VAR, there is no evidence of a clear lead-lag relationship. Instead, both markets seem to absorb information simultaneously, driven by the same underlying shocks rather than delayed spillovers. The DCC-GARCH model, however, maps the evolving nature of this bond, revealing a remarkably high average correlation that is highly persistent but shifts over time depending on market conditions. Ultimately, these results match what we expect from modern, highly integrated financial systems where immediate co-movement dominates. By framing these dynamics within a single empirical setup, the study adds a clear Swedish perspective to the broader literature on market interconnectedness.