Stock and Currency Market Linkages: New Evidence from Realized Spillovers in Higher Moments
40 Pages Posted: 25 Aug 2011 Last revised: 5 May 2016
Date Written: November 20, 2015
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 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 is relatively stronger in developed markets.
Keywords: fractionally integrated VAR, bootstrap, generalized impulse response, spillovers, higher moments, intraday data
JEL Classification: C32, F31, G15
Suggested Citation: Suggested Citation