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A Frequency-Specific Factorization to Identify Commonalities with an Application to the European Bond Markets

Boffelli, S., Novotny, J. and Urga, G. (2020). A Frequency-Specific Factorization to Identify Commonalities with an Application to the European Bond Markets. Journal of Financial Econometrics,

Abstract

We propose a frequency-specific framework to link the common features in the multivariate high-frequency price jumps with the low-frequency exogenous factors. We introduce the measure of commonality and the measure of multiplicity based on high-frequency data and define the notions of co-arrivals and co-jumps to explore the contribution of individual assets. We employ the framework to study the 10-year high-frequency European government bond yields over June 2009-April 2019 as a function of macro-factors, macro-announcements, bond auctions and unconventional monetary policy announcements. Both idiosyncratic and common jump arrivals are significant, with the idiosyncratic arrivals being more sensitive to financial distress as characterised by a low level of commonality in jump arrivals.

Publication Type: Article
Additional Information: This is a pre-copyedited, author-produced version of an article accepted for publication in Journal of Financial Econometrics following peer review. The version of record Boffelli, S., Novotny, J. and Urga, G. (2020). A Frequency-Specific Factorization to Identify Commonalities with an Application to the European Bond Markets. Journal of Financial Econometrics, is to be available online at: https://academic.oup.com/jfec.
Publisher Keywords: Co-arrivals, Co-jumps, European Government Yields, Macro-factors, Macro-announcements, Auctions, Unconventional Monetary Policy Announcements
Subjects: H Social Sciences > HG Finance
Departments: Business School > Finance
Date Deposited: 07 Sep 2020 11:49
URI: https://openaccess.city.ac.uk/id/eprint/24863
[img] Text - Accepted Version
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