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A Frequency-Specific Factorization to Identify Commonalities with an Application to the European Bond Markets
[Systemic Risk and Stability in Financial Networks]

Author

Listed:
  • Simona Boffelli
  • Jan Novotny
  • Giovanni Urga

Abstract

We propose a frequency-specific framework to link the common features in the multivariate high-frequency price jumps with the low-frequency exogenous factors. We introduce the measure of commonality and the measure of multiplicity based on high-frequency data and define the notions of coarrivals and cojumps to explore the contribution of individual assets. We employ the framework to study the 10-year high-frequency European government bond yields over June 2009–April 2019 as a function of macrofactors, macroannouncements, bond auctions, and unconventional monetary policy announcements. Both idiosyncratic and common jump arrivals are significant, with the idiosyncratic arrivals being more sensitive to financial distress as characterized by a low level of commonality in jump arrivals.

Suggested Citation

  • Simona Boffelli & Jan Novotny & Giovanni Urga, 2022. "A Frequency-Specific Factorization to Identify Commonalities with an Application to the European Bond Markets [Systemic Risk and Stability in Financial Networks]," Journal of Financial Econometrics, Oxford University Press, vol. 20(4), pages 681-715.
    • Handle: RePEc:oup:jfinec:v:20:y:2022:i:4:p:681-715.
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    File URL: http://hdl.handle.net/10.1093/jjfinec/nbaa039
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    More about this item

    Keywords

    coarrivals; cojumps; European government yields; macrofactors; macroannouncements; Auctions; Unconventional Monetary Policy Announcements;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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