14 © 2021 Conscientia Beam. All Rights Reserved. CROSS-TIME-FREQUENCY ANALYSIS OF VOLATILITY INTERDEPENDENCE AMONG STOCK AND CURRENCY MARKETS Hasan Fehmi Baklaci 1 Tezer Yelkenci 2+ 1,2 Izmir University of Economics, Turkey. (+ Corresponding author) ABSTRACT Article History Received: 19 October 2020 Revised: 13 November 2020 Accepted: 27 November 2020 Published: 21 December 2020 Keywords Volatility spillover Multivariate GARCH Shock transmission Intraday analysis Exchange rates Stock market. JEL Classification: G11; G13; G15. Volatility transmission between stock markets and currency markets is an ongoing debate in the pertinent literature. However, the majority of the previous studies have used only daily data with a limited sample. This study aims to fill this gap by identifying how sample stock markets and currencies play the role of volatility transmitter and receiver, particularly on an intraday basis. To this end, this research detects volatility interdependencies among various stock markets and currencies using five major stock indices and six major currency pairs. The results for daily and intraday frequencies are quite disparate. In particular, the results signify that the transmission of volatility from currency markets to stock markets is much stronger on an intraday basis. The results also indicate a strengthening of the volatility transmission and spillover interdependence among stock markets on a daily basis. These results may be ascribed to the continuous trading mechanism of these markets, which in turn allows the news to impact these markets first, which then transmit it to stock markets. The findings obtained also imply that intraday price fluctuations in major currencies should be closely tracked to monitor intraday volatility patterns in stock markets. Contribution/Originality: This study is one of very few studies which have investigated volatility interdependencies among various stock markets and currencies by utilising daily and intraday data simultaneously. The findings are also unique signifying that the transmission of volatility from currency markets to stock markets is much stronger on an intraday basis. 1. INTRODUCTION The pattern of volatility spillover in global financial markets is one of the most critical issues for traders and policymakers because a strong volatility interaction between various markets has advantages and disadvantages. While the existence of volatility spillover in currency markets may limit hedging opportunities, it may also allow for possible speculative trading gains. Volatility spillover is associated with information flow (Ross, 1989), so volatility spillover studies improve the understanding of information transmission within or across different markets. Cross-market volatility spillover studies are important for gauging the speed of different financial markets’ adjustment to new information. Volatility transmission between stock markets and currency markets is an ongoing debate in the pertinent literature. The volatility interdependence between these two markets is of critical importance for portfolio managers and speculators. Most studies of volatility transmission in these two markets have documented the informational impact of stock markets on currency markets through volatility spillover (Andreou, Matsi, & Savvides, 2013; Caporale, Hunter, & Ali, 2014; Do, Brooks, Treepongkaruna, & Wu, 2016; The Economics and Finance Letters 2021 Vol. 8, No. 1, pp. 14-31. ISSN(e): 2312-430X ISSN(p): 2312-6310 DOI: 10.18488/journal.29.2021.81.14.31 © 2021 Conscientia Beam. All Rights Reserved.