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Tail dependence between Central and Eastern European and major European stock markets: a copula approach

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  • Silvo Dajcman

Abstract

This article analyses dynamic tail dependence between the returns of the three largest Central and Eastern European (CEE) stock markets (Hungary, Czech Republic and Poland) and two major Eurozone stock markets (Germany and France). Tail dependence is modelled by a constant and dynamic 'symmetrized Joe-Clayton' (SJC) copula assuming GARCH stock market return processes. The results of the dynamic SJC copula model show that the dependence between pair-wise observed stock markets is time-varying and asymmetric with lower tail dependence mostly exceeding upper tail dependence. The results of the article imply that advantages of international portfolio diversification are reduced in downturns.

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  • Silvo Dajcman, 2013. "Tail dependence between Central and Eastern European and major European stock markets: a copula approach," Applied Economics Letters, Taylor & Francis Journals, vol. 20(17), pages 1567-1573, November.
    • Handle: RePEc:taf:apeclt:v:20:y:2013:i:17:p:1567-1573
    DOI: 10.1080/13504851.2013.829185
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    Cited by:

    1. Bouteska, Ahmed & Sharif, Taimur & Abedin, Mohammad Zoynul, 2023. "COVID-19 and stock returns: Evidence from the Markov switching dependence approach," Research in International Business and Finance, Elsevier, vol. 64(C).

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