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Linkages between asset classes during the financial crisis, accounting for market microstructure noise and non-synchronous trading

  • Nathaniel Frank

    ()

    (Oxford-Man Institute and Department of Economics, University of Oxford)

In this paper we analyse market co-movements during the global financial crisis. Using high frequency data and accounting for market microstructure noise and non-synchronous trading, interdependencies between differing as-set classes such as equity, FX, fixed income, commodity and energy securities are quantified. To this end multivariate realised kernels and GARCH models are employed. We find that during the current period of market dislocations and times of increased risk aversion, assets have become more correlated when applying these intra-day measures. FX pairs seemingly lead the other variables, but commodities remain entirely unaffected.

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File URL: http://www.nuffield.ox.ac.uk/economics/papers/2009/w4/HF%20Working%20Paper.pdf
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Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2009-W04.

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Length: 52 pages
Date of creation: 01 Mar 2009
Date of revision:
Handle: RePEc:nuf:econwp:0904
Contact details of provider: Web page: http://www.nuff.ox.ac.uk/economics/

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  1. King, Mervyn & Sentana, Enrique & Wadhwani, Sushil, 1994. "Volatility and Links between National Stock Markets," Econometrica, Econometric Society, vol. 62(4), pages 901-33, July.
  2. Robert F. Engle & Giampiero M. Gallo, 2003. "A Multiple Indicators Model For Volatility Using Intra-Daily Data," Econometrics Working Papers Archive wp2003_07, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
  3. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
  4. King, Mervyn A & Wadhwani, Sushil, 1990. "Transmission of Volatility between Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(1), pages 5-33.
  5. Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005. "Empirical modelling of contagion: a review of methodologies," Quantitative Finance, Taylor & Francis Journals, vol. 5(1), pages 9-24.
  6. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
  7. Guglielmo Caporale & Nikitas Pittis & Nicola Spagnolo, 2006. "Volatility transmission and financial crises," Journal of Economics and Finance, Springer, vol. 30(3), pages 376-390, September.
  8. Marcello Pericoli & Massimo Sbracia, 2001. "A Primer on Financial Contagion," Temi di discussione (Economic working papers) 407, Bank of Italy, Economic Research and International Relations Area.
  9. repec:oxf:wpaper:264 is not listed on IDEAS
  10. Heiko Hesse & Nathaniel Frank & Brenda González-Hermosillo, 2008. "Transmission of Liquidity Shocks; Evidence From the 2007 Subprime Crisis," IMF Working Papers 08/200, International Monetary Fund.
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