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VaR Forecasts and Dynamic Conditional Correlations for Spot and Futures Returns on Stocks and Bonds

Author

Listed:
  • Abdul Hakim

    (Faculty of Economics, Indonesian Islamic University)

  • Michael McAleer

    (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute and Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics, University of Tokyo)

Abstract

The paper investigates the interdependence and conditional correlations between futures contracts and their underlying assets, both for stock and bond markets, and the impact of the interdependence and conditional correlations on VaR forecasts. The paper finds evidence of volatility spillovers from spot (futures) to futures (spot) markets, and time-varying conditional correlations between futures and their underlying assets. It also finds evidence that the DCC model of Engle (2002) provides slightly better VaR forecasts as compared with the CCC model of Bollerslev (1990) and the BEKK model of Engle and Kroner (1995).

Suggested Citation

  • Abdul Hakim & Michael McAleer, 2009. "VaR Forecasts and Dynamic Conditional Correlations for Spot and Futures Returns on Stocks and Bonds," CARF F-Series CARF-F-178, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf178
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    File URL: https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/184.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Berger, T. & Missong, M., 2014. "Financial crisis, Value-at-Risk forecasts and the puzzle of dependency modeling," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 33-38.

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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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