The Copula-GARCH Model of Conditional Dependencies: An International Stock Market Application
Détails
ID Serval
serval:BIB_7A8D160D322B
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Institution
Titre
The Copula-GARCH Model of Conditional Dependencies: An International Stock Market Application
Périodique
Journal of International Money and Finance
ISSN
0261-5606
Statut éditorial
Publié
Date de publication
08/2006
Peer-reviewed
Oui
Volume
25
Numéro
5
Pages
827-853
Langue
anglais
Résumé
Modeling the dependency between stock-market returns is a difficult task when returns follow a complicated dynamics. When returns are non-normal, it is often simply impossible to specify the multivariate distribution relating two or more return series. In this context, we propose a new methodology based on copula functions, which consists in estimating first the univariate distributions and then the joining distribution. In such a context, the dependency parameter can easily be rendered conditional and time-varying. We apply this methodology to the daily returns of four major stock markets. Our results suggest that conditional dependency depends on past realizations for European market pairs only. For these markets, dependency is found to be more widely affected when returns move in the same direction than when they move in opposite direction. Modeling the dynamics of the dependency parameter also suggests that dependency is higher and more persistent between European stock markets.
Mots-clé
Stock indices, International correlation, Dependency, GARCH model, Skewed Student-t distribution, Copula function
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Création de la notice
19/11/2007 11:35
Dernière modification de la notice
20/08/2019 15:36