Asymmetric volatility spillover between European equity and foreign exchange markets: Evidence from the frequency domain

Evan Warshaw

International Review of Economics & Finance, 2020, vol. 68, issue C, 1-14

Abstract: This study analyzes volatility spillovers between European equity and foreign exchange markets over 2003–2019 by exploring causal linkages in realized volatility across the frequency domain. Daily volatility spillovers are bidirectional and asymmetric across the frequency domain in most cases. Spillovers from equity to foreign exchange markets are significant at high, mid-range, and low frequencies, whereas typically at lower frequencies in the opposite direction. Sub-sample estimations identify similar patterns of asymmetric frequency significance; however, volatility spillovers are primarily unidirectional prior to the Global Financial Crisis. Focusing on slower moving volatility, weekly analysis suggests weaker equity market driven spillovers.

Keywords: Volatility spillover; Frequency domain causality; Realized volatility; Equity prices; Exchange rates (search for similar items in EconPapers)
JEL-codes: C32 F31 G15 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:68:y:2020:i:c:p:1-14

DOI: 10.1016/j.iref.2020.03.001

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