Common trends in global volatility

This paper investigates the long-term patterns in global foreign exchange, equity and bond markets in three different trading zones, namely, Japan, Europe and the United States. Recent advances in the measurement of volatility from high-frequency data are used together with the concepts of fractional integration and cointegration. The specific objective is to consider whether there are common trends that drive volatility in the global marketplace. This so-called commonality in volatility hypothesis is formulated using a cofractional model. The results confirm that volatility in all three financial asset markets, across all three trading zones share a single common trend which lends itself to interpretation as a global news stream. (C) 2016 Elsevier Ltd. All rights reserved.