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Volatility equicorrelation: A cross-market perspective

Sofiane Aboura () and Julien Chevallier

Economics Letters, 2014, vol. 122, issue 2, 289-295

Abstract: This paper contains the first empirical application of the Dynamic Equicorrelation (DECO) model to a cross-market dataset composed of equities, bonds, foreign exchange rates and commodities during 1983–2013. The originality of our approach consists of examining the volatility equicorrelations, by updating the concept of ‘volatility surprise’. We document that the average volatility equicorrelation across markets is around 15%, while being time-varying with regime shifts before/after September 2005 and with a low mean-reversion level.

Keywords: DECO; Cross-market; Volatility equicorrelation (search for similar items in EconPapers)
Date: 2014
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Working Paper: Volatility equicorrelation: A cross-market perspective (2014)
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