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 in 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 InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/12323.
Date of creation: Feb 2014
Date of revision:
Publication status: Published in Economics Letters, 2014, Vol. 122, no. 2
DECO; Cross-market; Volatility equicorrelation;
Other versions of this item:
- Aboura, Sofiane & Chevallier, Julien, 2014. "Volatility equicorrelation: A cross-market perspective," Economics Letters, Elsevier, Elsevier, vol. 122(2), pages 289-295.
- 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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