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IR17-003-AndradaFelixa_FearConnectedness.pdf (1.49 MB)

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Working paper

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2017

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cc-by-nc-nd, (c) Andrada-Félixa et al., 2017
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/110550

Fear connectedness among asset classes

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Abstract

This study investigates the interconnection between five implied volatility indices representative of different financial markets during the period August 1, 2008-September 9, 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 Yılmaz (2014). Second, we make use of a dynamic analysis to evaluate both the net directional connectedness for each market and all net pair-wise directional connectedness. Our results suggest that slightly more than only 38.23%, of the total variance of the forecast errors is explained by shocks across markets, indicating that the remainder 61.77% of the variation is due to idiosyncratic shocks. Furthermore, we find that volatility connectedness varies over time, with a surge during periods of increasing economic and financial instability

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Mercat financer, Anàlisi de regressió, Anàlisi de variància, Estadística matemàtica

Subject (English)

Financial market, Regression analysis, Analysis of variance, Mathematical statistics

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Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))

Citation

ANDRADA-FÉLIX, Julián, FERNÁNDEZ-PÉREZ, Adrián and SOSVILLA RIVERO, Simón. Fear connectedness among asset classes. IREA – Working Papers. 2017. Vol.  IR17/03. ISSN 2014-1254. [consulted: 9 of August of 2026]. Available at: https://hdl.handle.net/2445/110550

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