The Westerly Index as complementary indicator of the North Atlantic oscillation in explaining drought variability across Europe

This paper analyses the influence of different atmospheric circulation indices on the multi-scalar drought variability across Europe by using the Standardized Precipitation Evapotranspiration Index (SPEI). The monthly circulation indices used in this study include the North Atlantic oscillation (NAO), the East Atlantic (EA), the Scandinavian (SCAN) and the East Atlantic-Western Russia (EA-WR) patterns, as well as the recently published Westerly Index (WI), defined as the persistence of westerly winds over the eastern north Atlantic region. The results indicate that European drought variability is better explained by the station-based NAO index and the WI than by any other combination of circulation indices. In northern and central Europe the variability of drought severity for different seasons and time-scales is strongly associated with the WI. On the contrary, the influence of the NAO on southern Europe droughts is stronger than that exerted by the WI. The correlation patterns of the NAO and WI with the SPEI show a spatial complementarity in shaping drought variability across Europe. Lagged correlations of the NAO and WI with the SPEI also indicate enough skill of both indices to anticipate drought severity several months in advance. As long as instrumental series of the NAO and WI are available, their combined use would allow inferring European drought variability for the last two centuries and improve the calibration and interpretation of paleoclimatic proxies associated with drought.

Volatility Spillover and Multivariate Volatility Impulse Response Analysis of GFC News Events

This paper applies two measures to assess spillovers across markets: the Diebold Yilmaz (2012) Spillover Index and the Hafner and Herwartz (2006) analysis of multivariate GARCH models using volatility impulse response analysis. We use two sets of data, daily realized volatility estimates taken from the Oxford Man RV library, running from the beginning of 2000 to October 2016, for the S&P500 and the FTSE, plus ten years of daily returns series for the New York Stock Exchange Index and the FTSE 100 index, from 3 January 2005 to 31 January 2015. Both data sets capture both the Global Financial Crisis (GFC) and the subsequent European Sovereign Debt Crisis (ESDC). The spillover index captures the transmission of volatility to and from markets, plus net spillovers. The key difference between the measures is that the spillover index captures an average of spillovers over a period, whilst volatility impulse responses (VIRF) have to be calibrated to conditional volatility estimated at a particular point in time. The VIRF provide information about the impact of independent shocks on volatility. In the latter analysis, we explore the impact of three different shocks, the onset of the GFC, which we date as 9 August 2007 (GFC1). It took a year for the financial crisis to come to a head, but it did so on 15 September 2008, (GFC2). The third shock is 9 May 2010. Our modelling includes leverage and asymmetric effects undertaken in the context of a multivariate GARCH model, which are then analysed using both BEKK and diagonal BEKK (DBEKK) models. A key result is that the impact of negative shocks is larger, in terms of the effects on variances and covariances, but shorter in duration, in this case a difference between three and six months.