What is the Best Approach to Measure the Interdependence between Different Markets?
AbstractIn order to measure the interdependence between different markets, we investigate and compare different measures of dependence including cross-correlation, conditional correlation, concordance and correlation in tails. In the latter case, we use the notion of copula and we define two kinds of diagnoses which enable us to adjust the joint empirical tail distribution in the case of two or three markets for the best copulas. In particular, this approach makes it possible to understand the evolution of the interdependence of more than two markets in the tails, in particular, when extremal values (which correspond to a shock) induce some turmoil in the evolution of the markets.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 95.
Length: 64 pages
Date of creation: 2002
Date of revision:
Interdependence; Conditional correlation; Concordance; Functions copulas.;
Find related papers by JEL classification:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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