Asymmetric volatility connectedness on the forex market

Jozef Baruník, Evžen Kočenda and Lukas Vacha

Journal of International Money and Finance, 2017, vol. 77, issue C, 39-56

Abstract: We show how bad and good volatility propagate through the forex market, i.e., we provide evidence for asymmetric volatility connectedness on the forex market. Using high-frequency, intra-day data of the most actively traded currencies over 2007–2015 we document the dominating asymmetries in spillovers that are due to bad, rather than good, volatility. We also show that negative spillovers are chiefly tied to the dragging sovereign debt crisis in Europe while positive spillovers are correlated with the subprime crisis, different monetary policies among key world central banks, and developments on commodities markets. It seems that a combination of monetary and real-economy events is behind the positive asymmetries in volatility spillovers, while fiscal factors are linked with negative spillovers.

Keywords: volatility; connectedness; spillovers; semivariance; asymmetric effects; forex market (search for similar items in EconPapers)
JEL-codes: C18 C58 E58 F31 G15 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (90)

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Working Paper: Asymmetric volatility connectedness on the forex market (2017)
Working Paper: Asymmetric volatility connectedness on forex markets (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:77:y:2017:i:c:p:39-56

DOI: 10.1016/j.jimonfin.2017.06.003

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