Year: 2005
Type: report
Abstract: This paper proposes to model time-varying conditional correlation as a function of conditional volatilities and possible additional explanatory variables via logit-type regression.The advantage of this approach is that it allows us to study the contributions of internal national market volatilities, external world market volatility, and some other factors to the correlation between stock market returns.Empirical investigation of the incremental effect of volatility on correlation is reported for a number of stock markets in North America, Asia, and Europe.Our results reveal that time-varying correlations between stock markets are primarily dependent on national and world market volatilities.Weaker evidence is found that correlations are driven by market downturns.Also, we find that correlations have been increasing between national markets in recent years.
Source: Osuva (University of Vaasa)
Authors: Knif, Johan, Kolari, James, Pynnönen, Seppo
Institutions: Hanken School of Economics, Texas A&M University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3048980009