Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/215002 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 8000
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper estimates a bivariate HEAVY system including daily and intra-daily volatility equations and its macro-augmented asymmetric power extension. It focuses on economic factors that exacerbate stock market volatility and represent major threats to financial stability. In particular, it extends the HEAVY framework with powers, leverage, and macro effects that improve its forecasting accuracy significantly. Higher uncertainty is found to increase the leverage and macro effects from credit and commodity markets on stock market realized volatility. Specifically, Economic Policy Uncertainty is shown to be one of the main drivers of US and UK financial volatility alongside global credit and commodity factors.
Subjects: 
asymmetries
economic policy uncertainty
HEAVY model
high-frequency data
macro-financial linkages
power transformations
realized variance
risk management
JEL: 
C22
C58
D80
E44
G01
G15
Document Type: 
Working Paper
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