Decomposing European Bond and Equity Volatility
AbstractThe 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 InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2007-06.
Date of creation: 11 May 2007
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Web page: http://www.econ.au.dk/afn/
European Asset Markets; Euro; GARCH; Integration of Financial Markets;
Other versions of this item:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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