Download or read book Extreme Correlation of International Equity Markets written by Francois M. Longin and published by . This book was released on 2017 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: Testing the hypothesis that international equity market correlation increases in volatile times is a difficult exercise and misleading results have often been reported in the past because of a spurious relationship between correlation and volatility. This paper focuses on extreme correlation, that is to say the correlation between returns in either the negative or positive tail of the multivariate distribution. Using ldquo;extreme value theoryrdquo; to model the multivariate distribution tails, we derive the distribution of extreme correlation for a wide class of return distributions. Using monthly data on the five largest stock markets from 1958 to 1996, we reject the null hypothesis of multivariate normality for the negative tail, but not for the positive tail. We also find that correlation is not related to market volatility per se but to the market trend. Correlation increases in bear markets, but not in bull markets.

Download or read book Extreme Correlation of International Equity Markets written by François M. Longin and published by . This book was released on 2000 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Correlation Structure of International Equity Markets During Extremely Volatile Periods written by François Longin and published by . This book was released on 1998 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Study of International Equity Market Correlation Using Extreme Value Theorem written by Sasinuch Laptikultham and published by . This book was released on 2014 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Correlation and Volatility Asymmetries in International Equity Markets written by CFA O'Toole (Randy) and published by . This book was released on 2013 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: The co-movement of international equity markets in different return environments is examined using estimates of realized correlation and volatility. Using a simple ordinary least squares (OLS) regression framework, correlations are shown to be similarly elevated in periods characterized by extreme returns in both up and down markets, which contradicts a body of extant research that finds correlations increase in down markets but not in up markets. In contrast, volatility is much greater in down markets than in up markets. This suggests that it is not a lack of diversification that matters for comparative performance in bear markets, but rather the relative magnitude of negative returns typically experienced during such periods.

Download or read book Modelling Time varying Conditional Correlation Across International Equity Markets written by Mahendra Chandra and published by . This book was released on 2005 with total page 193 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Return volume Dependence and Extremes in International Equity Markets written by Terry A. Marsh and published by . This book was released on 2000 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Covariance and Correlation in International Equity Returns written by Rachel A.J. Pownall and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Benefits to portfolio diversification depend crucially on correct correlation estimates, hence it is of great importance to both risk management and portfolio optimisation that the exact nature of the correlation structure between international financial assets is understood. Recent discussion on the correlation of international equity returns has focussed on the issue of whether extreme movements in international financial markets are more highly correlated than usual returns. This implies a reduction in the benefits from portfolio diversification since extreme returns are more likely to occur with greater simultaneity. Using the Value-at-Risk methodology we are able to measure the quantile correlation structure implicit in international asset returns in a simple manner without having to resort to fully parametric modelling. We illustrate that the extraction of the quantile covariance structure from this quantile correlation structure is non-trivial. Using daily data on stock market indices for a variety of countries we observe how the correlation and covariance structure changes as we move into the tails of the return distribution. We find for extreme stock market movements the benefits to international diversification are significantly curtailed even after discarding spurious correlation changes.

Download or read book Does Extreme Correlation Matter in Global Equity Asset Allocation written by Bruno Solnik and published by . This book was released on 2018 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Global asset allocation provides risk diversification. But international market correlation increases sharply during global crises and diversification benefit disappears when it is most needed. We model these correlation breaks and derive the asset allocation implications. The model can quickly detect crises and suggests adapting allocation for changing correlation and volatility, as the crisis probability evolves. The out-of-sample results for ten major equity markets over 2008-2016 show significant improvements in the Sharpe ratio and maximum drawdown over mean-variance, fat-tail distribution, passive indices and 1/N rule. A benefit of the model is that it is conceptually intuitive and amenable to simple implementation in asset allocation and risk management.

Download or read book Dependence Structure and Extreme Comovements in International Equity and Bond Markets written by Georges Tsafack Kemassong and published by . This book was released on 2006 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Equity returns are more dependent in bear markets than in bull markets. This phenomenon known as asymmetric dependence is well documented in many previous studies including Erb et al (1994), Longin and Solnik (2001), Ang and Bekaert (2002), Ang and Chen (2002), Das and Uppal (2003), Patton (2004) and references therein. By reformulating the extreme exceedance correlation result of Longin and Solnik (2001) in an equivalent fashion as tail dependence, we show analytically that a multivariate GARCH model or a regime switching (RS) model based on normal innovations cannot reproduce this asymmetric dependence. We propose an alternative model which allows tail dependence for lower returns and keeps tail independence for upper returns. This model is applied to international equity and bond markets from two pairs of countries, the two leading markets in North-America (US and Canada) and two major markets of the Euro zone (France and Germany) to investigate their dependence structure. It includes one normal regime in which dependence is symmetric and a second regime characterized by asymmetric dependence. Empirical results show that the dependence between equities and bonds is low even in the same country, while the dependence between international assets of the same type is large in both regimes. The cross-country dependence is specially large in the asymmetric regime. This phenomenon possibly is due to the nonlinearity in dependence of international returns characterized by the presence of extreme dependence that is absent in the tail of a multivariate normal distribution. Exchange rate volatility seems to be a factor contributing to asymmetric dependence. With the introduction of a fixed exchange rate the dependence between France and Germany becomes less asymmetric and more normal than before. High exchange rate volatility is associated with a high level of asymmetry. Monte Carlo Tests confirm the presence of asymmetric dependence in both pairs of countries.

Download or read book Extreme Contagion in Equity Markets written by Jorge A. Chan-Lau and published by International Monetary Fund. This book was released on 2002-05 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study uses bivariate extremal dependence measures, based on the number of equity return co-exceedances in two markets, to quantify both negative and positive equity returns contagion in mature and emerging equity markets during the past decade. The results indicate (a) higher contagion for negative returns than for positive returns; (b) a secular increase in contagion in Latin America not matched in other regions; (c) global increases in contagion following the 1998 financial crises; and (d) that the use of simple correlations as a proxy for contagion could be misleading, as the former exhibit low correlation with extremal dependence measures of contagion.

Download or read book Comovement in International Equity Markets written by W. Jos Jansen and published by . This book was released on 2011 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate shifts in correlation patterns among international equity returns at the market level as well as the industry level. We develop a novel bivariate GARCH model for equity returns with a smoothly time-varying correlation and then derive a Lagrange Multiplier statistic to test the constant-correlation hypothesis directly. Applying the test to weekly data from Germany, Japan, the UK and the US in the period 1980-2000, we find that correlations among the German, UK and US stock markets have doubled, whereas Japanese correlations have remained the same. Both dates of change and speeds of adjustment vary widely across countries and sectors.

Download or read book International Capital Flows written by Martin Feldstein and published by University of Chicago Press. This book was released on 2007-12-01 with total page 500 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent changes in technology, along with the opening up of many regions previously closed to investment, have led to explosive growth in the international movement of capital. Flows from foreign direct investment and debt and equity financing can bring countries substantial gains by augmenting local savings and by improving technology and incentives. Investing companies acquire market access, lower cost inputs, and opportunities for profitable introductions of production methods in the countries where they invest. But, as was underscored recently by the economic and financial crises in several Asian countries, capital flows can also bring risks. Although there is no simple explanation of the currency crisis in Asia, it is clear that fixed exchange rates and chronic deficits increased the likelihood of a breakdown. Similarly, during the 1970s, the United States and other industrial countries loaned OPEC surpluses to borrowers in Latin America. But when the U.S. Federal Reserve raised interest rates to control soaring inflation, the result was a widespread debt moratorium in Latin America as many countries throughout the region struggled to pay the high interest on their foreign loans. International Capital Flows contains recent work by eminent scholars and practitioners on the experience of capital flows to Latin America, Asia, and eastern Europe. These papers discuss the role of banks, equity markets, and foreign direct investment in international capital flows, and the risks that investors and others face with these transactions. By focusing on capital flows' productivity and determinants, and the policy issues they raise, this collection is a valuable resource for economists, policymakers, and financial market participants.

Download or read book The Internationalization of Equity Markets written by Jeffrey A. Frankel and published by University of Chicago Press. This book was released on 2008-04-15 with total page 428 pages. Available in PDF, EPUB and Kindle. Book excerpt: This timely volume addresses three important recent trends in the internationalization of United States equity markets: extensive market integration through foreign investment and links among stock prices around the world; increasing securitization as countries such as Japan come to rely more than ever before on markets in equities and bonds at the expense of banks; and the opening of national financial systems of newly industrializing countries to international financial flows and institutions, as governments remove capital controls and other barriers. Eight essays examine such issues as the current extent of international market integration, gains to U.S. investors through international diversification, home-country bias in investing, the role of time and location around the world in stock trading, and the behavior of country funds. Other, long-standing questions about equity markets are also addressed, including market efficiency and the accuracy of models of expected returns, with a particular focus on variances, covariances, and the price of risk according to the Capital Asset Pricing Model.

Download or read book International Portfolio Diversification written by Peh San Zee and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Correlation in International Equity and Currency Markets written by Elizabeth A. Sheedy and published by . This book was released on 1997 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Correlation Breakdown and Extreme Dependence in Emerging Equity Markets written by Stelios D. Bekiros and published by . This book was released on 2009 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: