Asymmetric volatility connectedness on forex markets

Jozef Baruník, Evžen Kočenda and Lukas Vacha

Abstract: We show how bad and good volatility propagate through forex markets, i.e., we provide evidence for asymmetric volatility connectedness on forex markets. Using high-frequency, intra-day data of the most actively traded currencies over 2007 - 2015 we document the dominating asymmetries in spillovers that are due to bad rather than good volatility. We also show that negative spillovers are chiefly tied to the dragging sovereign debt crisis in Europe while positive spillovers are correlated with the subprime crisis, different monetary policies among key world central banks, and developments on commodities markets. It seems that a combination of monetary and real-economy events is behind the net positive asymmetries in volatility spillovers, while fiscal factors are linked with net negative spillovers.

Date: 2016-07
New Economics Papers: this item is included in nep-cse, nep-eec and nep-fmk
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Asymmetric volatility connectedness on the forex market (2017)
Working Paper: Asymmetric volatility connectedness on the forex market (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1607.08214

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