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Volatility transmission patterns and terrorist attacks

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Author Info
Helena Chulia
Francisco Climent
Pilar Soriano
Hipolit Torro

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Abstract

The objective of this study is to analyse volatility transmission between the US and Eurozone stock markets considering the financial market responses to the September 11, March 11 and July 7 terrorist attacks. In order to do this, we use a multivariate GARCH model and take into account the asymmetric volatility phenomenon, the non-synchronous trading problem and the turmoil periods themselves. Moreover, a graphical analysis of the Asymmetric Volatility Impulse-Response Functions (AVIRF) is introduced, which takes into consideration the financial market responses to the terrorist attacks. Results suggest that there is bidirectional and asymmetric volatility transmission and show the different impacts that terrorist attacks had on both markets.

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File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/14697680802637882&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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Publisher Info
Article provided by Taylor and Francis Journals in its journal Quantitative Finance.

Volume (Year): 9 (2009)
Issue (Month): 5 ()
Pages: 607-619
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Handle: RePEc:taf:quantf:v:9:y:2009:i:5:p:607-619

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Related research
Keywords: Volatility modelling; International finance; International asset pricing; GARCH models; Multivariate volatility; Risk management;

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