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http://hdl.handle.net/10553/56350
Title: | Time connectedness of fear | Authors: | Andrada Félix, Julián Fernández Pérez,Adrián Fernández Rodríguez, Fernando Sosvilla Rivero,Simón Javier |
UNESCO Clasification: | 531206 Finanzas y seguros 530904 Estructura del mercado |
Keywords: | Implied volatility indices Financial market Linkages Connectedness Vector Autoregression Variance Decomposition |
Issue Date: | 2018 | Publisher: | Institut de Recerca en Economia Aplicada Regional i Pública | Project: | ECO | Abstract: | This paper examines the interconnection between four implied volatility indices representative of the investors' consensus view of expected stock market volatility at different maturities during the period January 3, 2011-May 4, 2018. To this end, we first perform a static analysis to measure the total volatility connectedness in the entire period using a framework proposed by Diebold and Yilmaz (2014). Second, we apply a dynamic analysis to evaluate both the net directional connectedness for each market using the TVP-VAR connectedness approach developed by Antonakakis and Gabauer (2017). Our results suggest that a 72.27%, of the total variance of the forecast errors is explained by shocks across the examined investor time horizons, indicating that the remainder 27.73% 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 a superior performance of the TVP-VAR approach to connectedness respect to the original one proposed by Diebold and Yilmaz (2014). | URI: | http://hdl.handle.net/10553/56350 | Source: | Documents de Treball ( IREA ), n. 18, p. 1-0 | URL: | http://dialnet.unirioja.es/servlet/articulo?codigo=6811414 |
Appears in Collections: | Documento de trabajo |
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