Cross-Market Spillovers with Volatility Surprisee
Copyright policy )Cross-Market Spillovers with Volatility Surprisee
AbstractThis article adopts the asymmetric DCC with one exogenous variable (ADCCX) model developed by Vargas (2008), by updating the concept of ‘volatility surprise’ to capture cross‐market relationships. Current methods for measuring spillovers do not focus on volatility interactions, and neglect cross‐effects between the conditional variances. This paper aims to fill this gap. The dataset includes four aggregate indices representing equities, bonds, foreign exchange rates and commodities from 1983 to 2013. The results provide strong evidence of spillover effects coming from the ‘volatility surprise’ component across markets. Against the background of the recent financial crisis, the aim is to contribute to the literature on the interdependencies of financial markets, both in conditional means and (co)variances. In addition, asset management implications are derived.
- French National Centre for Scientific Research France
- Paris Nanterre University France
- University of Paris France
- EconomiX France
- Paris Dauphine University France
C.C3.C30 - General, 330, Economie financière, Financial Market, 332, G.G1.G10 - General, Crisis, Asset management, Cross-market relationships, Volatility surprise, Volatility spillover, ADCCX, Asset management., G.G3.G32, [SHS.ECO] Humanities and Social Sciences/Economics and Finance, Cross-market relationships,Volatility surprise,Volatility spillover,ADCCX,Asset management, G.G1.G10, Volatility spillover, G.G1.G15, Exchange Rate, G.G3.G32 - Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill, F.F3.F31 - Foreign Exchange, F.F3.F31, ADCCX, C.C3.C32, C.C3.C32 - Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes • State Space Models, G.G1.G15 - International Financial Markets, C.C4.C40, Cross-market relationships, C.C4 - Econometric and Statistical Methods: Special Topics, Foreign Exchange, Volatility surprise, [SHS.GESTION] Humanities and Social Sciences/Business administration, C.C4.C40 - General, jel: jel:C4, jel: jel:C32, jel: jel:G15
C.C3.C30 - General, 330, Economie financière, Financial Market, 332, G.G1.G10 - General, Crisis, Asset management, Cross-market relationships, Volatility surprise, Volatility spillover, ADCCX, Asset management., G.G3.G32, [SHS.ECO] Humanities and Social Sciences/Economics and Finance, Cross-market relationships,Volatility surprise,Volatility spillover,ADCCX,Asset management, G.G1.G10, Volatility spillover, G.G1.G15, Exchange Rate, G.G3.G32 - Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill, F.F3.F31 - Foreign Exchange, F.F3.F31, ADCCX, C.C3.C32, C.C3.C32 - Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes • State Space Models, G.G1.G15 - International Financial Markets, C.C4.C40, Cross-market relationships, C.C4 - Econometric and Statistical Methods: Special Topics, Foreign Exchange, Volatility surprise, [SHS.GESTION] Humanities and Social Sciences/Business administration, C.C4.C40 - General, jel: jel:C4, jel: jel:C32, jel: jel:G15
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