Modeling Conditional Dependencies between Polish Financial Returns with Markov-Switching Copula Models

• Autorzy: Ryszard Doman
• Języki publikacji: EN

Abstrakty

EN

In this paper we model the conditional dependence structure for daily returns on the WIG20 index representing largest companies listed on the Warsaw Stock Exchange, and the MIDWIG index calculated based on shares values of medium-sized companies from the exchange. Our approach uses a Markovswitching copula model that allows us to investigate asymmetry in conditional dependencies between extremal returns on the indices. The result concerning the existence of significant asymmetry in tail dependence that we derive can be of importance for risk management.(fragment of text)

Słowa kluczowe

EN

Econometrics; Switching model; Warsaw Stock Exchange Index

PL

Ekonometria; Model przełącznikowy; Warszawski Indeks Giełdowy (WIG)

• Czasopismo: Dynamic Econometric Models
• Rocznik: 2008
• Tom: 8
• Strony: 21--28

Twórcy

autor

Ryszard Doman

• Adam Mickiewicz University in Poznań, Poland

Bibliografia

• Durrett, R. (1999), Essentials of Stochastic Processes, Springer, New York.
• Embrechts, P., McNeil, A., Straumann, D. (2002), Correlation and Dependence in Risk Management: Properties and Pitfalls, in: Risk Management: Value at Risk and Beyond, Cambridge University Press, Cambridge, 176-223.
• Engle, R. F. (2002), Dynamic Conditional Correlation: A Simple Class of Multivariate GARCH Models, Journal of Business and Economic Statistics, 20, 339-350.
• Lambert, P., Laurent, S. (2001), Modelling Financial Time Series Using GARCH-type Models with a Skewed Student Distribution for the Innovations, Discussion Paper 0125, Institut de Statistique, Université Catholique de Louvain.
• Nelsen, R. B. (2006), An Introduction to Copulas, Springer Science+Business Media, Inc., New York.
• Patton, A. J. (2001), Modelling Time-Varying Exchange Rate Dependence Using the Conditional Copula, Working paper 2001-09, University of California, San Diego.
• Patton, A. J. (2004), On the Out-of-Sample Importance of Skewness and Asymmetric Dependence for Asset Allocation, Journal of Financial Econometrics, 2, 130-168.
• Patton, A. J. (2006), Modelling Asymmetric Exchange Rate Dependence, International Economic Review, 47, 527-556.
• Rodriguez, J. C. (2007), Measuring Financial Contagion: A copula approach, Journal of Empirical Finance, 14, 401-423.
• Sklar, A. (1959), Fonctions de repartition à n dimensions et leurs marges, Publicatons de Institut Statistique de Universite de Paris, 8, 229-231.
• Tsafack, G. (2006), Dependence Structure and Extreme Comovements in International Equity and Bond Markets, Working Paper available at SSRN.