This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Testing the Gaussian Copula Hypothesis for Financial Assets Dependences

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Y. Malevergne (ISFA-Lyon and Univ. Nice/CNRS)
D. Sornette (Univ. Nice/CNRS and UCLA)
Abstract

Using one of the key property of copulas that they remain invariant under an arbitrary monotonous change of variable, we investigate the null hypothesis that the dependence between financial assets can be modeled by the Gaussian copula. We find that most pairs of currencies and pairs of major stocks are compatible with the Gaussian copula hypothesis, while this hypothesis can be rejected for the dependence between pairs of commodities (metals). Notwithstanding the apparent qualification of the Gaussian copula hypothesis for most of the currencies and the stocks, a non-Gaussian copula, such as the Student's copula, cannot be rejected if it has sufficiently many ``degrees of freedom''. As a consequence, it may be very dangerous to embrace blindly the Gaussian copula hypothesis, especially when the correlation coefficient between the pair of asset is too high as the tail dependence neglected by the Gaussian copula can be as large as 0.6, i.e., three out five extreme events which occur in unison are missed.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://arxiv.org/abs/cond-mat/0111310
File Format: text/html
File Function: Abstract
Download Restriction: no
File URL: http://arxiv.org/pdf/cond-mat/0111310
File Format: application/pdf
File Function: Latest version
Download Restriction: no

Publisher Info
Paper provided by arXiv.org in its series Quantitative Finance Papers with number cond-mat/0111310.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Nov 2001
Date of revision:
Publication status: Published in Quantitative Finance, 3, 231--250 (2003)
Handle: RePEc:arx:papers:cond-mat/0111310

Contact details of provider:
Web page: http://arxiv.org/

For technical questions regarding this item, or to correct its listing, contact: (arXiv administrators).

Related research
Keywords:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Graciela L. Kaminsky & Sergio L. Schmukler, 1999. "What triggers market jitters: a chronicle of the Asian crisis," International Finance Discussion Papers 634, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  2. Ilan Goldfajn & Taimur Baig, 1999. "Financial market contagion in the Asian crisis," Textos para discussão 400, Department of Economics PUC-Rio (Brazil). [Downloadable!]
  3. Pagan, Adrian, 1996. "The econometrics of financial markets," Journal of Empirical Finance, Elsevier, vol. 3(1), pages 15-102, May. [Downloadable!] (restricted)
  4. מחקר - ביטוח לאומי, 2000. "Volume 6," Working Papers 62, National Insurance Institute of Israel. [Downloadable!]
  5. Starica, Catalin, 1999. "Multivariate extremes for models with constant conditional correlations," Journal of Empirical Finance, Elsevier, vol. 6(5), pages 515-553, December. [Downloadable!] (restricted)
  6. Umberto Cherubini & Elisa Luciano, 2002. "Multivariate Option Pricing with Copulas," ICER Working Papers - Applied Mathematics Series 05-2002, ICER - International Centre for Economic Research. [Downloadable!]
  7. De Vries, C.G. & Leuven, K.U., 1994. "Stylized Facts of Nominal Exchange Rate Returns," Papers 94-002, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
  8. Joshua Rosenberg, 1999. "Semiparametric Pricing of Multivariate Contingent Claims," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-028, New York University, Leonard N. Stern School of Business-. [Downloadable!]
  9. François Longin, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, 04. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? RePEc also has a blog.

This page was last updated on 2010-3-19.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.