Asymmetric and time-frequency based networks of currency markets

Syed Jawad Hussain Shahzad, Mudassar Hasan and Massimiliano Caporin

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: We examine asymmetries in the volatility spillover of international currency markets over the short and long run, with a focus on the COVID-19 pandemic. In doing so, we propose partial quantile coherency network approach. Our results indicate heterogeneous behaviour of currencies’ volatility networks under various market conditions across investment time horizons. The volatility networks are driven by developed currency markets and by geographical proximity in Europe and Asia. We do not find asymmetry in the dependence structures of positive and negative currency volatilities. The dependence structure changes during COVID-19 especially in the long run. Many currencies show disentangled behaviour, which suggests their hedging and diversification potential.

Keywords: Forex markets; Quantile coherency; Network connectedness; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: A11 F31 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003690

DOI: 10.1016/j.frl.2023.103997

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