Universidad Complutense de Madrid
E-Prints Complutense

Testing for volatility co-movement in bivariate stochastic volatility models

Downloads

Downloads per month over past year

41441

Impacto

Downloads

Downloads per month over past year



Chen, Jinghui and Kobayashi, Masahito and McAleer, Michael (2017) Testing for volatility co-movement in bivariate stochastic volatility models. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 10, 2017, ISSN: 2341-2356 ] (Unpublished)

[thumbnail of 1710.pdf]
Preview
PDF
Creative Commons Attribution Non-commercial Share Alike.

596kB



Abstract

The paper considers the problem of volatility co-movement, namely as to whether two financial returns have perfectly correlated common volatility process, in the framework of multivariate stochastic volatility models and proposes a test which checks the volatility co-movement. The proposed test is a stochastic volatility version of the co-movement test proposed by Engle and Susmel (1993), who investigated whether international equity markets have volatility co-movement using the framework of the ARCH model.
In empirical analysis we found that volatility co-movement exists among closelylinked stock markets and that volatility co-movement of the exchange rate markets tends to be found when the overall volatility level is low, which is contrasting to the often-cited finding in the financial contagion literature that financial returns have co-movement in the level during the financial crisis.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Lagrange multiplier test; Volatility co-movement; Stock markets; Exchange rate Markets; Financial crisis
Subjects:Sciences > Mathematics > Finance
Social sciences > Economics > Depressions
Social sciences > Economics > Econometrics
JEL:C12, C58, G01, G11
Series Name:Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2017
Number:10
ID Code:41441
Deposited On:21 Feb 2017 09:06
Last Modified:13 Mar 2017 10:51

Origin of downloads

Repository Staff Only: item control page