Volatility equicorrelation: A cross-market perspective
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 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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|Date of creation:||Feb 2014|
|Date of revision:|
|Publication status:||Published in Economics Letters, 2014, Vol. 122, no. 2|
|Contact details of provider:|| Web page: http://www.dauphine.fr/en/welcome.html|
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