Flight-to-quality and asymmetric volatility responses in US Treasuries

Mardi Dungey*, Michael McKenzie, Demosthenes N. Tambakis

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)

Abstract

Flight-to-quality during times of financial crisis is a feature of financial markets. Here, a simple strategic model demonstrates that some preference asymmetry is sufficient to generate endogenous flight-to-quality from an emerging stock market to US Treasury bonds. The empirical evidence from a TARCH model supports the significance of emerging equity market shocks in accounting for the asymmetric properties of US Treasuries across the maturity structure. This effect is found to be more pronounced since the turn of the 21st century.

Original languageEnglish
Pages (from-to)252-267
Number of pages16
JournalGlobal Finance Journal
Volume19
Issue number3
DOIs
Publication statusPublished - 2009

Keywords

  • Asymmetric GARCH
  • Emerging markets
  • Financial crises
  • Flight-to-quality
  • Volatility

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