A new channel for global volatility propagation

We compare two channels for global impact on local volatility: the direct channel in which global variables affect the expected value of local volatility, and a new channel in which they affect local volatility persistence. Using 21 equity indices in 17 developed economies, we show that (1) global variables are the main determinants of local volatility persistence; (2) the volatility-persistence channel contributes far more to local volatility variations than the direct channel; and (3) global average return contributes far more to local volatility variations than global average volatility. The global impact on local volatility persistence help explain the commonality in global volatility dynamics.

• Publication year

  2023

• Venue

  European Journal of Finance

• Publication date

  2023-05-11

• Fields of study

  Not labeled

• Identifiers
  DOI 10.1080/1351847X.2023.2206040
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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