publication . Preprint . 2005

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

Lakshmi Balasubramanyan;
Open Access
  • Published: 04 Sep 2005
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...
free text keywords: jel:C32, jel:F3, jel:G15
Related Organizations
34 references, page 1 of 3

Bae, K. and G.A. Karolyi (1994), Good news, bad news and international spillover of stock return volatility between Japan and the US. Pacific-Basin Finance Journal 2, 405-438.

Balasubramanyan, L. and Gamini Premaratne (2003), Volatility Comovement and Spillover: Some New Evidence from Singapore. National University of Singapore, Working Paper

Bauwens, L. , S. Laurent , J. Rombouts , (2004) , Multivariate GARCH Models - A Survey , Core Discussion Paper, Accepted for publication in the Journal of Applied Econometrics. [OpenAIRE]

Bollerslev, T. (1990), Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model. Review of Economics and Statistics, 72, 498-505. [OpenAIRE]

Capiello, L., Engle R.F., and Sheppard, K (2003), Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns. ECB Working Paper No. 204.

Calvet, L.E., A.J. Fischer, S.B. Thompson, (2004), Volatility Comovement: A Multifrequency Approach. Forthcoming in Journal of Econometrics.

Engle, R., T.Ito and W.L. Lin (1990), Meteor Showers or Heat Waves? Heteroskedastic IntraDaily Volatility in the Foreign Exchange Market. Econometrica .Vol 58 , 525-542 . [OpenAIRE]

Engle, R., T.Ito and W.L. Lin (1994), Do Bulls and Bears Move Across Borders? International Transmission of Stock Returns and Volatility. Review of Financial Studies .Vol 7 , 507-538 . [OpenAIRE]

Engle, R.F. (2002), Dynamic Conditional Correlation - A Simple Class of Multivariate GARCH Models. Journal of Business and Economic Statistics, Vol 20 (3).

Engle, R.F. and Susmel, R., (1993), Common Volatility in International Equity Markets. Journal of Business and Economic Statistics, Vol 11 (2), 167-176

Engle, R.F., (May 2004), Downside Risk - Implications for Financial Management? Presentation in Carlos

Fleming, J., C.Kirby, B.Ostdiek (2001), The Economic Value of Volatility Timing, Journal of Finance, Vol.56, 329-352.

Fleming, J., C.Kirby, B.Ostdiek (2003), The Economic Value of Volatility Timing Using Realized Volatility, Journal of Finance, Vol.67, 473-509.

Fratzscher, M. (2001) , Financial Market Integration in Europe: On the Effects of EMU on Stock Markets , ECB Working Paper 48.

Hamao, Y.R., R.W.Masulis and V.K.Ng (1990), Correlations in Price Changes and Volatility Across International Stock Markets. Review of Financial Studies, Vol 3, 281-307 [OpenAIRE]

34 references, page 1 of 3
Powered by OpenAIRE Open Research Graph
Any information missing or wrong?Report an Issue