Volatility transmission between stock and foreign exchange markets: a connectedness analysis
| Autor: | Fernando Fernández-Rodríguez, Simon Sosvilla-Rivero |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
Economics and Econometrics
050208 finance Mercados bursátiles y financieros Social connectedness 05 social sciences Monetary economics Finanzas Vector autoregression Foreign exchange rates 0502 economics and business Economics Variance decomposition of forecast errors Foreign exchange Econometría 050207 economics Volatility transmission Stock (geology) |
| Zdroj: | E-Prints Complutense. Archivo Institucional de la UCM instname E-Prints Complutense: Archivo Institucional de la UCM Universidad Complutense de Madrid |
| ISSN: | 1466-4283 0003-6846 |
| DOI: | 10.1080/00036846.2019.1683143 |
| Popis: | This paper empirically investigates volatility transmission among stock and foreign exchange markets in seven major world economies during the period July 1988 to May 2018. To this end, we first perform a static and dynamic analysis to measure the total volatility connectedness in the entire period (the system-wide approach) using a framework recently proposed by Diebold and Yılmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each market. To gain further insights, we examine the time-varying behavior of net pair-wise directional connectedness during the financial turmoil periods experienced in the sample period Our results suggest that slightly more than half of the total variance of the forecast errors is explained by shocks across markets rather than by idiosyncratic shocks. Furthermore, we find that volatility connectedness varies over time, with a surge during periods of increasing economic and financial instability. |
| Databáze: | OpenAIRE |
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