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Title: Fear connectedness among asset classes
Authors: Andrada-Félix, Julián 
Fernandez-Perez, Adrian
Sosvilla-Rivero, Simón
UNESCO Clasification: 5302 Econometría
Keywords: Implied Volatility
Financial Stress
Equity Markets
Debt Crisis, et al
Issue Date: 2018
Journal: Applied economics (Print) 
Abstract: This study investigates the interconnection between five implied volatility indices representative of different financial markets during the period 1 August 2008–29 December 2017. 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. Second, we make use of a dynamic analysis to evaluate both the net directional connectedness for each market and all net pairwise directional connectedness. Our results suggest that a 38.99%, of the total variance of the forecast errors is explained by shocks across markets, indicating that the remainder 61.01% 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. Finally, we also document frequently switch between a net volatility transmitter and a net volatility receiver role in the five markets under study.
ISSN: 0003-6846
DOI: 10.1080/00036846.2018.1441521
Source: Applied Economics[ISSN 0003-6846],v. 50, p. 4234-4249
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