Common trends in global volatility

Adam Clements, Stan Hurn and V.V. Volkov

Journal of International Money and Finance, 2016, vol. 67, issue C, 194-214

Abstract: This paper investigates the long-term patterns in global foreign exchange, equity and bond markets in three different trading zones, namely, Japan, Europe and the United States. Recent advances in the measurement of volatility from high-frequency data are used together with the concepts of fractional integration and cointegration. The specific objective is to consider whether there are common trends that drive volatility in the global marketplace. This so-called commonality in volatility hypothesis is formulated using a cofractional model. The results confirm that volatility in all three financial asset markets, across all three trading zones share a single common trend which lends itself to interpretation as a global news stream.

Keywords: Volatility; News arrival; Fractional cointegration (search for similar items in EconPapers)
JEL-codes: C32 C51 C52 G10 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:67:y:2016:i:c:p:194-214

DOI: 10.1016/j.jimonfin.2016.05.001

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