This article proposes a modeling framework for the study of changes in cross-market comovement conditional on volatility regimes. Methodologically, we extend the Dynamic Conditional Correlation multivariate GARCH model to allow the dynamics of correlations to depend on asset variances through a threshold structure. The empirical application of our model to a sample of international stock markets in 1994–2011 indicates that the periods of market turbulence are associated with an increase in cross-market comovement. The modeling framework proposed in the article represents a useful tool for the study of market contagion.
Volatility Threshold Dynamic Conditional Correlations: An International Analysis
CAPORIN, MASSIMILIANO
2013
Abstract
This article proposes a modeling framework for the study of changes in cross-market comovement conditional on volatility regimes. Methodologically, we extend the Dynamic Conditional Correlation multivariate GARCH model to allow the dynamics of correlations to depend on asset variances through a threshold structure. The empirical application of our model to a sample of international stock markets in 1994–2011 indicates that the periods of market turbulence are associated with an increase in cross-market comovement. The modeling framework proposed in the article represents a useful tool for the study of market contagion.
File in questo prodotto:
Non ci sono file associati a questo prodotto.
Pubblicazioni consigliate
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
