European Business Schools Librarian's Group
Finance Research Group Working Papers,
University of Aarhus, Aarhus School of Business, Department of Business Studies
No F-2004-01: Decomposing European bond and equity volatility
Charlotte Christiansen ()
Additional contact information
Charlotte Christiansen: Department of Accounting, Aarhus School of Business, Postal: The Aarhus School of Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Abstract: The paper investigates volatility spillover from US and aggregate European asset markets into European national asset markets. A main contribution is that bond and equity volatilities are analyzed simultaneously. A new model belonging to the 'volatilityspillover' family is suggested: The conditional variance of e.g. the unexpected German stock return is divided into separate effects from the contemporaneous idiosyncratic variance of US bonds, US stocks, European bonds, European stocks, German bonds, and German stocks. Significant volatility-spillover effects are found. The national bond (stock) volatilities are mainly influenced by bond (stock) effects. Global, regional, and local volatility effects are all important. The introduction of the euro is associated with a structural break.
Keywords: European Asset Markets; GARCH; International Finance; Volatility Spillover
41 pages, September 20, 2005
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