Geographical Diversification with a World Volatility Index
Julien Chevallier and
Additional contact information
Sofiane Aboura: DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique
Post-Print from HAL
This paper proposes a new ‘World Volatility Index', coined WVIX, by constructing the first index that approximates the aggregate volatility level of the G20 countries. The empirical analysis makes use of the factor dynamic conditional correlation model – with an automated methodology to detect the number of factors – in order to (i) sum up the information contained in the implied volatility indexes belonging to the US, the UK, the Eurozone, Japan and emerging countries, and (ii) examine the time-varying correlation between them. The results reveal that the WVIX evolves around 22%, but its activity can vary sharply depending on its exposure to various sources of geographical risks (e.g. the latest 2010-11 European debt crisis). Thus constructed as an early warning device, the methodology behind the WVIX can be replicated by market practitioners to datasets that better suit their needs.
Keywords: G20; Financial crisis; Crisis Episodes Detection; World Market Volatility; Diversification; Factor-DCC (search for similar items in EconPapers)
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01529755
References: Add references at CitEc
Citations: Track citations by RSS feed
Published in Journal of Multinational Financial Management, Elsevier, 2015, 30, pp.62-82. ⟨10.1016/j.mulfin.2015.03.001⟩
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Geographical diversification with a World Volatility Index (2015)
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:hal:journl:hal-01529755
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().