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Stock and currency market linkages: New evidence from realized spillovers in higher moments

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  • Do, Hung Xuan
  • Brooks, Robert
  • Treepongkaruna, Sirimon
  • Wu, Eliza

Abstract

We examine the linkages both within and between stock and foreign exchange (FX) markets via three higher moments of return distributions (volatility, skewness and kurtosis). We find that FX market linkages (in the 2nd and 4th moments) are relatively more prominent in developed markets. Cross-asset markets in emerging countries are more likely to be negatively linked through the 3rd moment but they are positively associated via the 2nd and 4th moments in developed markets indicating common concerns regarding tail risks in the former. Finally, cross-asset market linkages are of a similar magnitude to intra-asset-market linkages within emerging markets but the latter are stronger in developed markets.

Suggested Citation

  • Do, Hung Xuan & Brooks, Robert & Treepongkaruna, Sirimon & Wu, Eliza, 2016. "Stock and currency market linkages: New evidence from realized spillovers in higher moments," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 167-185.
    • Handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:167-185
    DOI: 10.1016/j.iref.2015.11.003
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    More about this item

    Keywords

    Spillovers; Fractionally integrated VAR; Long memory; Higher moments; Intraday data;
    All these keywords.

    JEL classification:

    • 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
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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