Finance & Financial Econometrics : 
Time: 09.30 am
Date: 23th of May 2023
Room 3001

Susana CAMPOS-MARTIN (Oxford University) “Novel Global and Regional Risk Factors”

Absract : A global factor may not be enough to capture worldwide common variation in financial volatilities or correlation of shocks to those volatilities. A two-factor model of financial volatilities is developed to measure the common volatility shocks to sovereign bond indices. We observe that their volatilities are driven by not only a global but also a group-specific, presumably European, volatility factor. Some of the events that would have been identified as global, such as presidential elections, turn out to have a much lower impact globally. Other events have an amplified effect when group-specific common effects are allowed. European countries are much more impacted by shocks such as the 2016 European Union membership referendum in the United Kingdom than the rest of the world. While the global volatility factor seems to predict global economic crises, the regional factor shows predictive power for the European sovereign debt crisis.

Joint work with R.F. Engle

Organizers:

Jean-Michel ZAKOIAN (CREST)

Sponsors:
CREST