Volatility equicorrelation: A cross-market perspective
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
TypeArticle accepté pour publication ou publié
Journal nameEconomics Letters
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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 / KeywordsDECO; Cross-market; Volatility equicorrelation
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