Asymmetric and time-frequency based networks of currency markets

22 Pages Posted: 24 Nov 2023

See all articles by Syed Jawad Hussain Shahzad

Syed Jawad Hussain Shahzad

Montpellier Business School

Mudassar Hasan

Teesside University

Massimiliano Caporin

University of Padua - Department of Statistical Sciences

Date Written: April 10, 2023

Abstract

We examine asymmetries in the volatility spillover of international currency markets over the short and long run, with a focus on the COVID-19 pandemic. In doing so, we propose partial quantile coherency network approach. Our results indicate heterogeneous behaviour of currencies’ volatility networks under various market conditions across investment time horizons. The volatility networks are driven by developed currency markets and by geographical proximity in Europe and Asia. We do not find asymmetry in the dependence structures of positive and negative currency volatilities. The dependence structure changes during COVID-19 especially in the long run. Many currencies show disentangled behaviour, which suggests their hedging and diversification potential.

Keywords: Forex markets, quantile coherency, network connectedness, COVID-19 pandemic

JEL Classification: A11, F31

Suggested Citation

Shahzad, Syed Jawad Hussain and Hasan, Mudassar and Caporin, Massimiliano, Asymmetric and time-frequency based networks of currency markets (April 10, 2023). Finance Research Letters, Vol. 55B, No. 103997, 2023, Available at SSRN: https://ssrn.com/abstract=4631533

Syed Jawad Hussain Shahzad (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins, 34080
Montpellier
France

Mudassar Hasan

Teesside University ( email )

Middlesbrough, TS1 3BA
United Kingdom

Massimiliano Caporin

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

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