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Asymmetric volatility connectedness on forex markets

Listed author(s):
  • Jozef Barunik
  • Evzen Kocenda
  • Lukas Vacha

We show how bad and good volatility propagate through forex markets, i.e., we provide evidence for asymmetric volatility connectedness on forex markets. Using high-frequency, intra-day data of the most actively traded currencies over 2007 - 2015 we document the dominating asymmetries in spillovers that are due to bad rather than good volatility. We also show that negative spillovers are chiefly tied to the dragging sovereign debt crisis in Europe while positive spillovers are correlated with the subprime crisis, different monetary policies among key world central banks, and developments on commodities markets. It seems that a combination of monetary and real-economy events is behind the net positive asymmetries in volatility spillovers, while fiscal factors are linked with net negative spillovers.

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File URL: http://arxiv.org/pdf/1607.08214
File Function: Latest version
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Paper provided by arXiv.org in its series Papers with number 1607.08214.

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Date of creation: Jul 2016
Handle: RePEc:arx:papers:1607.08214
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