Testing for volatility co-movement in bivariate stochastic volatility models
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...
| Autores: | , , |
|---|---|
| Tipo de recurso: | informe técnico |
| Fecha de publicación: | 2017 |
| País: | España |
| Institución: | Universidad Complutense de Madrid (UCM) |
| Repositorio: | Docta Complutense |
| Idioma: | inglés |
| OAI Identifier: | oai:docta.ucm.es:20.500.14352/22887 |
| Acceso en línea: | https://hdl.handle.net/20.500.14352/22887 |
| Access Level: | acceso abierto |
| Palabra clave: | C12 C58 G01 G11 Lagrange multiplier test Volatility co-movement Stock markets Exchange rate Markets Financial crisis Economía financiera Crisis económicas Econometría (Economía) 5307.06 Fluctuaciones Económicas 5302 Econometría |
| Sumario: | 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. |
|---|