In this paper we are interested in detecting contagion from US to European stock market volatilitiesin the period immediately after the Lehman Brothers’ collapse. The analysis, based on a factordecomposition of the covariance matrix of implied and realized volatilities, is carried for differentsub-samples (identified as normal and crisis periods) and across different (high) frequency bands.In particular, the analysis is split in two stages. In the first stage, we retrieve the time series ofwavelet coefficients for each volatility series for high frequency scales, using the MaximalOverlapping Discrete Wavelet transform and, in a second stage, we apply Maximum Likelihood fora factor decomposition of the short-run covariance matrix.Given our focus on the standardizedfactor loadings associated with the US shock (to control for an heteroscedasticity bias), theempirical findings show no evidence of contagion from the US stock market volatility in realizedvolatility to all the European countries, while for implied volatility we find a weak evidence ofcontagion which depends on the scale (the only country not influenced being Netherlands).
|Titolo della pubblicazione ospite||CEFIN|
|Numero di pagine||28|
|Stato di pubblicazione||Published - 2014|