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A critique of the inappropriate interpretation of the quantile connectedness approach by Ando et al. (2022)

Author

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  • Tripathi, Abhinava
  • Jha, Ravi Raushan
  • Vadhava, Charu

Abstract

Recently, there has been an exponential rise in the studies examining quantile connectedness across the conditional quantiles of volatility, following the seminal work of Ando et al. (2022). Our article conducts a literature review of several such studies from reputable journals that incorrectly interpret the results from volatility connectedness across the conditional quantiles. More specifically, these studies incorrectly relate lower quantiles of volatility to extreme adverse (or bearish) conditions and upper quantiles of volatility to upmarket (or bullish) conditions. Our literature review shows that, once the correct interpretation of conditional quantiles of volatility is imposed, many of these studies' novel and surprising results become consistent with the prior literature.

Suggested Citation

  • Tripathi, Abhinava & Jha, Ravi Raushan & Vadhava, Charu, 2025. "A critique of the inappropriate interpretation of the quantile connectedness approach by Ando et al. (2022)," Energy Economics, Elsevier, vol. 143(C).
  • Handle: RePEc:eee:eneeco:v:143:y:2025:i:c:s0140988325001148
    DOI: 10.1016/j.eneco.2025.108291
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    More about this item

    Keywords

    Quantile connectedness; Volatility spillovers; Portfolio management; Risk contagion;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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