Volatility equicorrelation: A cross-market perspective
AbstractThis paper contains the first empirical application of the Dynamic Equicorrelation (DECO) model to a cross-market dataset composed of equities, bonds, foreign exchange rates and commodities during 1983–2013. The originality of our approach consists of examining the volatility equicorrelations, by updating the concept of ‘volatility surprise’. We document that the average volatility equicorrelation across markets is around 15%, while being time-varying with regime shifts before/after September 2005 and with a low mean-reversion level.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 122 (2014)
Issue (Month): 2 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/ecolet
DECO; Cross-market; Volatility equicorrelation;
Other versions of this item:
- Chevallier, Julien & Aboura, Sofiane, 2014. "Volatility equicorrelation: A cross-market perspective," Economics Papers from University Paris Dauphine 123456789/12323, Paris Dauphine University.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
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