A Frequency-Specific Factorization to Identify Commonalities with an Application to the European Bond Markets

Journal of Financial Econometrics, 2020

54 Pages Posted: 30 Nov 2020

See all articles by Simona Boffelli

Simona Boffelli

Centre for Econometric Analysis, Faculty of Finance, Cass Business School, London, UK

Jan Novotny

Centre for Econometric Analysis, Faculty of Finance, Cass Business School, London, UK

Giovanni Urga

Centre for Econometric Analysis, Faculty of Finance, Cass Business School, London, UK and University of Bergamo, Italy

Date Written: September 15, 2020

Abstract

We propose a frequency-specific framework to link the common features in the multivariate high-frequency price jumps with the low-frequency exogenous factors. We introduce the measure of commonality and the measure of multiplicity based on high-frequency data and define the notions of co-arrivals and co-jumps to explore the contribution of individual assets. We employ the framework to study the 10-year high-frequency European government bond yields over June 2009-April 2019 as a function of macro-factors, macro-announcements, bond auctions and unconventional monetary policy announcements. Both idiosyncratic and common jump arrivals are significant, with the idiosyncratic arrivals being more sensitive to financial distress as characterized by a low level of commonality in jump arrivals.

Keywords: Co-arrivals, Co-jumps, European Government Yields, Macro-factors, Macro-announcements, Auctions, Unconventional Monetary Policy Announcements

JEL Classification: G12, C12, C32, H63

Suggested Citation

Boffelli, Simona and Novotny, Jan and Urga, Giovanni, A Frequency-Specific Factorization to Identify Commonalities with an Application to the European Bond Markets (September 15, 2020). Journal of Financial Econometrics, 2020, Available at SSRN: https://ssrn.com/abstract=3700384 or http://dx.doi.org/10.2139/ssrn.3700384

Simona Boffelli

Centre for Econometric Analysis, Faculty of Finance, Cass Business School, London, UK ( email )

Jan Novotny

Centre for Econometric Analysis, Faculty of Finance, Cass Business School, London, UK ( email )

Giovanni Urga (Contact Author)

Centre for Econometric Analysis, Faculty of Finance, Cass Business School, London, UK and University of Bergamo, Italy ( email )

108 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 8698 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/g.urga

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