Volatility transmission between stock and exchange-rate markets: A connectedness analysis

This paper empirically investigates volatility transmission among stock and foreign exchange markets in seven major world economies during the period July 1988 to January 2015. To this end, we first perform a static and dynamic analysis to measure the total volatility connectedness in the entire period (the system-wide approach) using a framework recently proposed by Diebold and Yilmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each market. To gain further insights, we examine the time-varying behaviour of net pair-wise directional connectedness during the financial turmoil periods experienced in the sample period Our results suggest that slightly more than half of the total variance of the forecast errors is explained by shocks across markets rather than by idiosyncratic shocks. Furthermore, we find that volatility connectedness varies over time, with a surge during periods of increasing economic and financial instability.

Volatility spillovers in EMU sovereign bond markets

We analyse volatility spillovers in EMU sovereign bond markets. First, we examine the unconditional patterns during the full sample (April 1999-January 2014) using a measure recently proposed by Diebold and Yılmaz (2012). Second, we make use of a dynamic analysis to evaluate net directional volatility spillovers for each of the eleven countries under study, and to determine whether core and peripheral markets present differences. Finally, we apply a panel analysis to empirically investigate the determinants of net directional spillovers of this kind.

Characterization of spatial–temporal patterns in dynamic speckle sequences using principal component analysis

Abstract. Speckle is being used as a characterization tool for the analysis of the dynamics of slow-varying phenomena occurring in biological and industrial samples at the surface or near-surface regions. The retrieved data take the form of a sequence of speckle images. These images contain information about the inner dynamics of the biological or physical process taking place in the sample. Principal component analysis (PCA) is able to split the original data set into a collection of classes. These classes are related to processes showing different dynamics. In addition, statistical descriptors of speckle images are used to retrieve information on the characteristics of the sample. These statistical descriptors can be calculated in almost real time and provide a fast monitoring of the sample. On the other hand, PCA requires a longer computation time, but the results contain more information related to spatial–temporal patterns associated to the process under analysis. This contribution merges both descriptions and uses PCA as a preprocessing tool to obtain a collection of filtered images, where statistical descriptors are evaluated on each of them. The method applies to slow-varying biological and industrial processes.

Characterization of dynamic speckle sequences using principal component analysis and image descriptors

Speckle is being used as a characterization tool for the analysis of the dynamic of slow varying phenomena occurring in biological and industrial samples. The retrieved data takes the form of a sequence of speckle images. The analysis of these images should reveal the inner dynamic of the biological or physical process taking place in the sample. Very recently, it has been shown that principal component analysis is able to split the original data set in a collection of classes. These classes can be related with the dynamic of the observed phenomena. At the same time, statistical descriptors of biospeckle images have been used to retrieve information on the characteristics of the sample. These statistical descriptors can be calculated in almost real time and provide a fast monitoring of the sample. On the other hand, principal component analysis requires longer computation time but the results contain more information related with spatial-temporal pattern that can be identified with physical process. This contribution merges both descriptions and uses principal component analysis as a pre-processing tool to obtain a collection of filtered images where a simpler statistical descriptor can be calculated. The method has been applied to slow-varying biological and industrial processes

Dynamic sea level changes following changes in the thermohaline circulation

Using the coupled climate model CLIMBER-3α, we investigate changes in sea surface elevation due to a weakening of the thermohaline circulation (THC). In addition to a global sea level rise due to a warming of the deep sea, this leads to a regional dynamic sea level change which follows quasi-instantaneously any change in the ocean circulation. We show that the magnitude of this dynamic effect can locally reach up to ~1m, depending on the initial THC strength. In some regions the rate of change can be up to 20-25 mm/yr. The emerging patterns are discussed with respect to the oceanic circulation changes. Most prominent is a south-north gradient reflecting the changes in geostrophic surface currents. Our results suggest that an analysis of observed sea level change patterns could be useful for monitoring the THC strength.

An econometric analysis of ETF and ETF futures in financial and energy markets using generated regressors

It is well known that that there is an intrinsic link between the financial and energy sectors, which can be analyzed through their spillover effects, which are measures of how the shocks to returns in different assets affect each other’s subsequent volatility in both spot and futures markets. Financial derivatives, which are not only highly representative of the underlying indices but can also be traded on both the spot and futures markets, include Exchange Traded Funds (ETFs), which is a tradable spot index whose aim is to replicate the return of an underlying benchmark index. When ETF futures are not available to examine spillover effects, “generated regressors” may be used to construct both Financial ETF futures and Energy ETF futures. The purpose of the paper is to investigate the covolatility spillovers within and across the US energy and financial sectors in both spot and futures markets, by using “generated regressors” and a multivariate conditional volatility model, namely Diagonal BEKK. The daily data used are from 1998/12/23 to 2016/4/22. The data set is analyzed in its entirety, and also subdivided into three subset time periods. The empirical results show there is a significant relationship between the Financial ETF and Energy ETF in the spot and futures markets. Therefore, financial and energy ETFs are suitable for constructing a financial portfolio from an optimal risk management perspective, and also for dynamic hedging purposes.