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Decomposing European Bond and Equity Volatility

  • Charlotte Christiansen

    ()

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

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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File URL: ftp://ftp.econ.au.dk/creates/rp/07/rp07_06.pdf
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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
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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