Asymmetric increasing trends in dependence in international equity markets

Okimoto, Tatsuyoshi

doi:10.1016/j.jbankfin.2014.05.025

Cited by 25 publications

(4 citation statements)

References 31 publications

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“…When we compare the pre‐crisis period with crisis and recovery, t and Normal copulas continue to provide the best fit in both subsamples. Thus, unlike in Okimoto (, ) and Chollete, Heinen and Valdesogo (), the underlying dependence structure remains unchanged in our sample.…”

contrasting

confidence: 49%

The Core, Periphery, and Beyond: Stock Market Comovements among EU and Non‐EU Countries

Goldstein

McCarthy

Orlov

2019

The Financial Review

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Using linear and nonlinear correlations, copulas, quantile dependence and lower tail dependence, we find that (1) equity markets of the advanced European Union (EU) countries comove more closely with each other than with the peripheral economies, (2) comovements with non‐EU countries are lower, (3) relative comovement structure before, during, and after the global financial crisis has been very stable, and (4) the level of comovements remained virtually the same between the crisis and post‐crisis periods. Our results are robust to controlling for Fama‐French, U.S. and global risk factors, as well as monetary policy, market interest rates, exchange rates, and uncertainty.

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contrasting

confidence: 49%

The Core, Periphery, and Beyond: Stock Market Comovements among EU and Non‐EU Countries

Goldstein

McCarthy

Orlov

2019

The Financial Review

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“…For instance, Christoffersen, Errunza, Jacobs, and Langloiset (2012) examine copula correlations in international stock markets and find a significant increasing trend that can be explained by neither volatility nor other financial and macroeconomic variables. Similarly, Berben and Jansen (2005) and Okimoto (2014) report the increasing dependence in major equity markets. In international bond markets, Kumar and Okimoto (2011) find an increasing trend in correlations among international long-term government bonds and a decreasing trend in correlations between shortand long-term government bonds within single countries.…”

Section: Introductionmentioning

confidence: 98%

Trends in stock-bond correlations

Ohmi

Okimoto

2015

Applied Economics

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Previous studies document the existence of long-run trends in comovements in the stock and bond markets. Following these findings, this paper examines possible trends in stock-bond return correlations. To this end, we introduce a trend component into a smooth transition regression (STR) model including the multiple transition variables of Aslanidis and Christiansen (2012). The results indicate the existence of significant decreasing trends in stock-bond correlations for many advanced safer countries. In addition, although stock market volatility continues to be an important factor in stock-bond correlations, the short rate and yield spread become only marginally significant once we introduce the trend component. Our out-of-sample analysis also demonstrates that the STR model including the CBOE Volatility Index (VIX) and time trend as the transition variables dominates other models. Furthermore, we find a significant increase in stock-bond correlations for riskier Eurozone countries around the beginning of the Euro crisis. Our findings of decreasing and increasing trends in stock-bond correlations can be considered as a consequence of the decreasing effects of diversification and more intensive flight-to-quality behavior that have taken place in recent years and after the Euro crisis.

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“…The literature on the dependencies across financial markets is extensive, with a majority of studies concentrating on the modeling of dependence and utilizing: correlations, extreme value techniques, or copula-based frameworks. 1 The copula models have been used to address asymmetric dependence structures between financial variables, such as: dependence across international equity markets (Hu, 2006;Rodriguez, 2007;Okimoto, 2008;Chollete et al, 2009;Markwat, 2014;Okimoto, 2014); exchange rates dependence (Patton, 2006); equity and foreign exchange market dependence (Ning, 2010); and equity and bond market dependence (Garcia and Tsafack, 2011). Hu (2006) uses a copula framework to define the terms the degree and the structure of dependence.…”

Section: Introductionmentioning

confidence: 99%

The Structure and Degree of Dependence in Government Bond Markets

et al. 2021

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Our study provides new evidence on asymmetric dependencies in international government bond markets, by examining bonds from developed, emerging, and frontier countries, using a quantile regression methodology. We find that the dependence structure for emerging and frontier markets significantly changes during financial crisis periods, which we show has important implications for international diversification of investment strategies. Moreover, we also examine in detail stock-bond correlations and uncover several instances of decoupling. In contrast, developed markets exhibit a more stable dependence pattern. In addition, we document that the degree and structure of dependence vary when foreign currencies are hedged or unhedged, and across bond maturity segments.

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Asymmetric increasing trends in dependence in international equity markets

Cited by 25 publications

References 31 publications

The Core, Periphery, and Beyond: Stock Market Comovements among EU and Non‐EU Countries

The Core, Periphery, and Beyond: Stock Market Comovements among EU and Non‐EU Countries

Trends in stock-bond correlations

The Structure and Degree of Dependence in Government Bond Markets

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