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Decomposing European Bond and Equity Volatility

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  • Charlotte Christiansen

    ()
    (School of Economics and Management, University of Aarhus, Denmark and CREATES)

Abstract

The paper investigates volatility spillover from US and aggregate European asset markets into European national asset markets. A main contribution is that bond and equity volatility spillover is analyzed simultaneously. A new model belonging to the "volatility-spillover" class is suggested: The conditional variance of e.g. the unexpected German stock return is divided into separate effects from US bonds, US stocks, European bonds, European stocks, German bonds, and German stocks. Significant volatilityspillover effects are found. The national bond (stock) volatilities are mainly influenced by bond (stock) effects. After the introduction of the euro the European markets have become more integrated, bond markets more so than stock markets.

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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2007-06.

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Length: 31
Date of creation: 11 May 2007
Date of revision:
Handle: RePEc:aah:create:2007-06

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Web page: http://www.econ.au.dk/afn/

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Keywords: European Asset Markets; Euro; GARCH; Integration of Financial Markets;

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References

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Citations

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Cited by:
  1. Robert-Paul Berben & W. Jos Jansen, 2005. "Bond Market and Stock Market Integration in Europe," DNB Working Papers 060, Netherlands Central Bank, Research Department.
  2. Don Bredin & Stuart Hyde, 2008. "Regime Change and the Role of International Markets on the Stock Returns of Small Open Economies," European Financial Management, European Financial Management Association, vol. 14(2), pages 315-346.
  3. Sugimoto, Kimiko & Matsuki, Takashi & Yoshida, Yushi, 2013. "The global financial crisis: An analysis of the spillover effects on African stock markets," MPRA Paper 50473, University Library of Munich, Germany.
  4. Johansson, Anders C., 2010. "Stock and Bond Relationships in Asia," Working Paper Series 2010-14, China Economic Research Center, Stockholm School of Economics.
  5. Berger, Tino & Pozzi, Lorenzo, 2013. "Measuring time-varying financial market integration: An unobserved components approach," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 463-473.
  6. Asgharian, Hossein & Nossman, Marcus, 2011. "Risk contagion among international stock markets," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 22-38, February.
  7. Jian Zhang & Dongxiang Zhang & Juan Wang & Yue Zhang, 2013. "Volatility Spillovers between Equity and Bond Markets: Evidence from G7 and BRICS," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 205-217, December.
  8. Christos Savva & Denise R Osborn & Len Gill, 2005. "Volatility, spillover Effects and Correlations in US and Major European Markets," Money Macro and Finance (MMF) Research Group Conference 2005 23, Money Macro and Finance Research Group.
  9. T. Berger & L. Pozzi, 2011. "A new model-based approach to measuring time-varying financial market integration," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/714, Ghent University, Faculty of Economics and Business Administration.
  10. Robert-Paul Berben & W. Jos Jansen, 2009. "Bond market and stock market integration in Europe: a smooth transition approach," Applied Economics, Taylor & Francis Journals, vol. 41(24), pages 3067-3080.

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