A Frequency-Specific Factorization to Identify Commonalities with an Application to the European Bond Markets*

Systemic Risk and Stability in Financial Networks

Simona Boffelli, Jan Novotny and Giovanni Urga

Journal of Financial Econometrics, 2022, vol. 20, issue 4, 681-715

Abstract: We propose a frequency-specific framework to link the common features in the multivariate high-frequency price jumps with the low-frequency exogenous factors. We introduce the measure of commonality and the measure of multiplicity based on high-frequency data and define the notions of coarrivals and cojumps to explore the contribution of individual assets. We employ the framework to study the 10-year high-frequency European government bond yields over June 2009–April 2019 as a function of macrofactors, macroannouncements, bond auctions, and unconventional monetary policy announcements. Both idiosyncratic and common jump arrivals are significant, with the idiosyncratic arrivals being more sensitive to financial distress as characterized by a low level of commonality in jump arrivals.

Keywords: coarrivals; cojumps; European government yields; macrofactors; macroannouncements; Auctions; Unconventional Monetary Policy Announcements (search for similar items in EconPapers)
JEL-codes: C12 C32 G12 H63 (search for similar items in EconPapers)
Date: 2022
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