Correlation dynamics between Asia-Pacifc, EU and US stock returns
|Title:||Correlation dynamics between Asia-Pacifc, EU and US stock returns||Authors:||Hyde, Stuart
|Permanent link:||http://hdl.handle.net/10197/1168||Date:||2007||Online since:||2009-06-10T14:13:17Z||Abstract:||This paper investigates the correlation dynamics in the equity markets of 13 Asia-Pacific countries, Europe and the US using the asymmetric dynamic conditional correlation GARCH model (AG-DCC-GARCH) introduced by Cappiello, Engle and Sheppard (2006). We find significant variation in correlation between markets through time. Stocks exhibit asymmetries in conditional correlations in addition to conditional volatility. Yet asymmetry is less appar- ent in less integrated markets. The Asian crisis acts as a structural break, with correlations increasing markedly between crisis countries during this period though the bear market in the early 2000s is a more significant event for correlations with developed markets. Our findings also provide further evidence consistent with increasing global market integration. The documented asymmetries and correlation dynamics have important implications for international portfolio diversification and asset allocation.||Type of material:||Working Paper||Publisher:||University College Dublin. School of Business. Centre for Financial Markets||Series/Report no.:||Centre for Financial Markets working paper series; WP-07-17||Copyright (published version):||2007, Centre for Financial Markets||Keywords:||Dynamic conditional correlation; Asymmetry; International portfolio diversification||Subject LCSH:||Stock exchanges--Econometric models
|Other versions:||http://www.ucd.ie/bankingfinance/docs/wp/WP-07-17.pdf||Language:||en||Status of Item:||Not peer reviewed|
|Appears in Collections:||Centre for Financial Markets Working Papers|
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