Volatility (Dis)Connect in International Markets

• 成果类型: Article; Early Access
• 署名作者: Colacito, R.; Croce, M. M.; Liu, Y.; Shaliastovich, I.
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; University of North Carolina School of Medicine; National Bureau of Economic Research; Bocconi University; Centre for Economic Policy Research - UK; Bocconi University; University of Hong Kong; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.03930
• 发表日期: 2025
• 关键词: volatility risk; foreign exchange disconnect; risk sharing

摘要

Lack of comovement between consumption differentials and real exchange rates is a traditional indicator of a disconnect of foreign exchange markets from economic fundamentals. We present novel empirical evidence for the disconnect between the volatilities, as opposed to the levels, of these variables. The volatility correlations are below one, but they are larger than the level correlations. We discuss the economics of volatility disconnect anomaly in settings with complete and incomplete markets and provide an explanation of our empirical findings based on international risk sharing of expected growth and volatility news shocks.