In this paper we investigate short-run co-movements before and after the Lehman Brothers’collapse among the volatility series of US and a number of European countries. The series underinvestigation (implied and realized volatility) exhibit long-memory and, in order to avoid missspecificationerrors related to the parameterization of a long memory multivariate model, we relyon wavelet analysis.More specifically, we retrieve the time series of wavelet coefficients for each volatility series forhigh frequency scales, using the Maximal Overlapping Discrete Wavelet transform and we applyMaximum Likelihood for a factor decomposition of the short-run covariance matrix.The empirical evidence shows an increased interdependence in the post-break period and points atan increasing (decreasing) role of the common shock underlying the dynamics of the implied(realized) volatility series, once we move from the 2-4 days investment time horizon to the 8-16days. Moreover, there is evidence of contagion from the US to Europe immediately after theLehman Brothers’ collapse, only for realized volatilities over an investment time horizon between 8and 16 days.
|Numero di pagine||26|
|Stato di pubblicazione||Published - 2013|