The Dynamic Correlations Among the G7 and China: Evidence from Both Realized and Implied Volatilities

Posted: 14 Jun 2016

See all articles by Xingguo Luo

Xingguo Luo

Zhejiang University, College of Economics and Academy of Financial Research

Xuyuanda Qi

Columbia University

Date Written: 2015

Abstract

This paper studies the dynamic correlations among the G7 and China by using EGARCH/DCC models proposed by Engle and Figlewski (2014). We find that the correlations among the G7 can be captured by a general correlation structure and a one-factor model when both realized and implied volatilities are used. However, the common factors in the one-factor model are different when the two different volatilities are considered. Particularly, the U.S. is not the common factor in the two cases. Further, there is no significant correlations between China and the G7 countries by using realized volatilities. Nevertheless, the correlations increase during the 2007-2008 financial crisis. Furthermore, there results are robust to subsample analysis and different measures of realized volatilities.

Suggested Citation

Luo, Xingguo and Qi, Xuyuanda, The Dynamic Correlations Among the G7 and China: Evidence from Both Realized and Implied Volatilities (2015). First Annual Volatility Institute at NYU Shanghai (VINS) Conference - 2015. Available at SSRN: https://ssrn.com/abstract=2795669

Xingguo Luo (Contact Author)

Zhejiang University, College of Economics and Academy of Financial Research ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

HOME PAGE: http://mypage.zju.edu.cn/xingguo

Xuyuanda Qi

Columbia University ( email )

New York, NY
United States
3433248997 (Phone)

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