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Volatility transmission between stock and exchange-rate markets: A connectedness analysis



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Fernández-Rodríguez, Fernando y Sosvilla-Rivero, Simón (2016) Volatility transmission between stock and exchange-rate markets: A connectedness analysis. [ Working Papers; nº 04, 2016, ISSN: 2530-0849 ]

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This paper empirically investigates volatility transmission among stock and foreign exchange markets in seven major world economies during the period July 1988 to January 2015. To this end, we first perform a static and dynamic analysis to measure the total volatility connectedness in the entire period (the system-wide approach) using a framework recently proposed by Diebold and Yilmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each market. To gain further insights, we examine the time-varying behaviour of net pair-wise directional connectedness during the financial turmoil periods experienced in the sample period Our results suggest that slightly more than half of the total variance of the forecast errors is explained by shocks across markets rather than by idiosyncratic shocks. Furthermore, we find that volatility connectedness varies over time, with a surge during periods of increasing economic and financial instability.

Tipo de documento:Documento de trabajo o Informe técnico
Palabras clave:Stock markets; Exchange rates; Market Linkages; Vector Autoregression; Variance Decomposition
Materias:Ciencias Sociales > Economía > Comercio
Ciencias Sociales > Economía > Dinero
JEL:C53, E44, F31, G15
Título de serie o colección:Working Papers
Código ID:40762
Depositado:12 Ene 2017 13:44
Última Modificación:17 Feb 2017 09:02

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