Time-Frequency Linkages and Co-Movements between the Euro and European Stock Market: A Continuous Wavelet Analysis

31 Pages Posted: 3 Jun 2017 Last revised: 25 Jun 2018

See all articles by Timotheos Paraskevopoulos

Timotheos Paraskevopoulos

Technical University of Dortmund

Peter N. Posch

TU Dortmund University

Date Written: June 20, 2017

Abstract

We investigate the evolution of co-movement and lead-lag relationships between the nominal effective European exchange rate and the largest European stock markets in the time and frequency dimension. We decompose the financial return series into different time scales and apply the cross-wavelet coherence and phase difference. Within our sample set, which consists of daily data from 2000 to 2016, we observe patterns consistent with the notion of contagion, suggesting strong and sudden increases in the cross-market synchronization on particular frequency bands. Investigating the lead-lag relationships between both markets, we observe periods and frequencies where the causality runs from one variable to the other and vice-versa.

Keywords: Wavelet, Europe, Cyclical and Anti-Cyclical Effects, Wavelet-Coherence, Lead-Lag Relationship

JEL Classification: C40, E32, E44

Suggested Citation

Paraskevopoulos, Timotheos and Posch, Peter N., Time-Frequency Linkages and Co-Movements between the Euro and European Stock Market: A Continuous Wavelet Analysis (June 20, 2017). Available at SSRN: https://ssrn.com/abstract=2979416 or http://dx.doi.org/10.2139/ssrn.2979416

Timotheos Paraskevopoulos (Contact Author)

Technical University of Dortmund ( email )

Emil-Figge-Stra├če 50
Dortmund, 44227
Germany

Peter N. Posch

TU Dortmund University ( email )

Otto Hahn Str. 6
Dortmund, 44227
Germany

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