Total, asymmetric and frequency connectedness between oil and forex markets
Jozef Barun\'ik and
Authors registered in the RePEc Author Service: Jozef Baruník () and
Evžen Kočenda ()
Papers from arXiv.org
We analyze total, asymmetric and frequency connectedness between the oil and forex markets using high-frequency intra-day data over 2007 -- 2015. Methodologically, we extend the Diebold-Yilmaz spillover index in two ways to account for asymmetric and frequency connectedness. Empirically, our results show that by combining crude oil with the set of currencies a total connectedness of the portfolio is lower than the total connectedness of the forex market itself. Further, in terms of asymmetries we show that bad volatility dominates connectedness on the forex market. However, when we add oil into a hypothetical portfolio of oil and foreign currencies, asymmetry in connectedness between the two classes of assets reverses in favor of the good volatility. Finally, the frequency connectedness analysis reveals that dynamic of the shorter and longer term connectedness dramatically differs. While shorter-term connectedness is usually low, the long-term connectedness sharply rises during the global financial crisis, European debt crisis, and after the oil price drop in 2014. Hence, the long-term connectedness reflects worrisome beliefs of investors and correlates with the increased market uncertainty.
New Economics Papers: this item is included in nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://arxiv.org/pdf/1805.03980 Latest version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1805.03980
Access Statistics for this paper
More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().