Peer-Reviewed Journal Details
Mandatory Fields
Connor, G;Suurlaht, A
2013
October
Journal of International Money and Finance
Dynamic stock market covariances in the Eurozone
Published
15 ()
Optional Fields
INTERNATIONAL DIVERSIFICATION INDUSTRIAL-STRUCTURE EQUITY RETURNS VOLATILITY EXCHANGE MODEL TRANSMISSION TIME RISK
37
353
370
This paper examines the short-term dynamics, macroeconomic sensitivities, and longer-term trends in the variances and covariances of national equity market index daily returns for eleven countries in the Euro currency zone. We modify Colacito, Engle and Ghysel's Mixed Data Sampling Dynamic Conditional Correlation Garch model to include a new scalar measure for the degree of correlatedness in time-varying correlation matrices. We also explore the robustness of the findings with a less model-dependent realized covariance estimator. We find a secular trend toward higher correlation during our sample period, and significant linkages between macroeconomic and market-wide variables and dynamic correlation. One notable finding is that average correlation between these markets is lower when their average GDP growth rate is lower or when more of them have negative GDP growth. (C) 2013 Elsevier Ltd. All rights reserved.
OXFORD
0261-5606
10.1016/j.jimonfin.2013.06.008
Grant Details