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Cross-Market Spillovers with 'Volatility Surprise'

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Date
2014-11
Link to item file
http://dx.doi.org/10.2139/ssrn.2472443
Dewey
Economie financière
Sujet
Cross-market relationships; Volatility surprise; Volatility spillover; ADCCX; Asset management; Crisis; Exchange Rate; Financial Market; Foreign Exchange
JEL code
C.C3.C32; C.C4.C40; F.F3.F31; G.G1.G10; G.G1.G15; G.G3.G32
Journal issue
Review of Financial Economics
Volume
23
Number
4
Publication date
11-2014
Article pages
194–207
Publisher
Elsevier
DOI
http://dx.doi.org/10.1016/j.rfe.2014.08.002
URI
https://basepub.dauphine.fr/handle/123456789/13806
Collections
  • DRM : Publications
Metadata
Show full item record
Author
Aboura, Sofiane
1032 Dauphine Recherches en Management [DRM]
Chevallier, Julien
status unknown
Type
Article accepté pour publication ou publié
Abstract (EN)
This 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.

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