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Volatility equicorrelation: A cross-market perspective

  • Aboura, Sofiane
  • Chevallier, Julien

This 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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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 122 (2014)
Issue (Month): 2 ()
Pages: 289-295

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Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:289-295
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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