Volatility equicorrelation: A cross-market perspective

Chevallier, Julien; Aboura, Sofiane

Chevallier, Julien; Aboura, Sofiane (2014), Volatility equicorrelation: A cross-market perspective, Economics Letters, 122, 2, p. 289–295. 10.1016/j.econlet.2013.12.008

Type

Article accepté pour publication ou publié

Date

2014-02

Journal name

Economics Letters

Volume

122

Number

Publisher

Elsevier

Pages

289–295

Publication identifier

10.1016/j.econlet.2013.12.008

Metadata

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Author(s)

Chevallier, Julien

Aboura, Sofiane
Dauphine Recherches en Management [DRM]

Abstract (EN)

This paper contains the first empirical application of the Dynamic Equicorrelation (DECO) model to a cross-market dataset composed of equities, bonds, foreign exchange rates and commodities during 1983-2013. The originality of our approach consists in examining the volatility equicorrelations, by updating the concept of ‘volatility surprise’. We document that the average volatility equicorrelation across markets is around 15%, while being time-varying with regime shifts before/after September 2005 and with a low mean-reversion level.

Subjects / Keywords

DECO; Cross-market; Volatility equicorrelation

JEL

C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
G10 - General
Q40 - General