Structural Volatility Impulse Response Function and Asymptotic Inference

Xiaochun Liu ()

Journal of Financial Econometrics, 2018, vol. 16, issue 2, 316-339

Abstract: This paper traces contemporaneous effects of independent shocks on predicted future volatilities through time. The shocks are identified through time-varying heteroscedasticity. I obtain the explicit functions of volatility impulse responses for a structural system of simultaneity. The asymptotic distributions of the derived functions are also studied in analytical forms for statistical inference. The potential of this new framework is empirically illustrated in a structural system of the U.S. commodity and stock markets.

Keywords: causality-in-volatility; commodity and stock market volatilities; contemporaneous effects; correlation structural break; structural dynamic conditional comovement (search for similar items in EconPapers)
JEL-codes: C3 C58 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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