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Volatility connectedness between global COVOL and major international volatility indices

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  • Xu, Danyang
  • Hu, Yang
  • Corbet, Shaen
  • Goodell, John W.

Abstract

This research explores dynamic connectedness amongst financial markets using the novel financial risk measure, global common volatility (COVOL) (Engle and Campos-Martins, 2023) and four major asset price implied volatility measures using a TVP-VAR framework. Considering several major international crises, results show that COVOL is a shock receiver while also identifying that VIX is a dominant risk driver of the pricing of risk transmission for the global financial system. The fluctuations of connectedness between COVOL and each implied volatility indices are highly dependent on periods of exceptional stress across international financial markets.

Suggested Citation

  • Xu, Danyang & Hu, Yang & Corbet, Shaen & Goodell, John W., 2023. "Volatility connectedness between global COVOL and major international volatility indices," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004841
    DOI: 10.1016/j.frl.2023.104112
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    Cited by:

    1. Lang, Chunlin & Hu, Yang & Goodell, John W. & Hou, Yang (Greg), 2024. "Connectedness and co-movement between dirty energy, clean energy and global COVOL," Finance Research Letters, Elsevier, vol. 63(C).
    2. Oxley, Les & Hu, Yang & Corbet, Shaen & Goodell, John W., 2023. "Role of precious metals in global risk dynamics: Exploring their impact from a connectedness approach," Finance Research Letters, Elsevier, vol. 58(PD).
    3. Lang, Chunlin & Xu, Danyang & Corbet, Shaen & Hu, Yang & Goodell, John W., 2024. "Global financial risk and market connectedness: An empirical analysis of COVOL and major financial markets," International Review of Financial Analysis, Elsevier, vol. 93(C).
    4. Ali, Shoaib & Moussa, Faten & Youssef, Manel, 2023. "Connectedness between cryptocurrencies using high-frequency data: A novel insight from the Silicon Valley Banks collapse," Finance Research Letters, Elsevier, vol. 58(PB).

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