publication . Preprint . 2005

Do Time-Varying Covariances, Volatility Comovement and Spillover Matter?

Lakshmi Balasubramanyan;
Open Access
  • Published: 04 Sep 2005
Abstract
Financial markets and their respective assets are so intertwined; analyzing any single market in isolation ignores important information. We investigate whether time varying volatility comovement and spillover impact the true variance-covariance matrix under a time-varying correlation set up. Statistically significant volatility spillover and comovement between US, UK and Japan is found. To demonstrate the importance of modelling volatility comovement and spillover, we look at a simple portfolio optimization application. A utility based comparison is used to evaluate the economic performance of the portfolio which considers time varying correlation with volatili...
Subjects
free text keywords: jel:C32, jel:F3, jel:G15
Related Organizations
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