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Realized EquiCorrelation: a bird’s-eye view of financial stress on equity markets

Aboura, Sofiane; Chevallier, Julien (2015), Realized EquiCorrelation: a bird’s-eye view of financial stress on equity markets, Applied Economics, 47, 47, p. 5013-5033. 10.1080/00036846.2015.1042139

Type
Article accepté pour publication ou publié
Date
2015
Journal name
Applied Economics
Volume
47
Number
47
Publisher
Routledge
Pages
5013-5033
Publication identifier
Metadata
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Author(s)
Aboura, Sofiane
Dauphine Recherches en Management [DRM]
Chevallier, Julien
Abstract (EN)
This article addresses the issue of measuring the level of aggregate financial stress on stock markets, which is a central issue for investors and policy-makers. To this end, Realized EquiCorrelation (REC) is obtained by plugging realized volatility as an input into the Dynamic EquiCorrelation (DECO) model where both the continuous and jump components of realized volatility are considered. An application is provided for the 20 major stock markets over January 2000–May 2014 using intra-day data. The results remarkably pick up financial stress periods.
Subjects / Keywords
Realized EquiCorrelation; DECO; Financial stress; Stock markets; High-frequency data; Co-jumps; Stocks
JEL
C50 - General
C58 - Financial Econometrics
G12 - Asset Pricing; Trading Volume; Bond Interest Rates
G14 - Information and Market Efficiency; Event Studies; Insider Trading