Dependence Structure and Portfolio Diversification on Central European Stock Markets
AbstractThis paper studies the dependence structure on Central European, German and UK stock markets within the framework of a semiparametric copula model for weekly stock index return pairs. Although the linear correlation is much lower, we find similar degree of lower tail dependence as between returns on stocks indices representing developed markets. We show in a simulation exercise that the implications of the estimated nonlinear dependencies for portfolio selection and risk management may be not only statisticaly but also economicaly important.
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Bibliographic InfoPaper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2007/02.
Length: 23 pages
Date of creation: Jan 2007
Date of revision: Jan 2007
dependence structure; tail dependence; portfolio selection; risk measures;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-23 (All new papers)
- NEP-FMK-2007-01-23 (Financial Markets)
- NEP-RMG-2007-01-23 (Risk Management)
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.:
- Fortin, Ines & Kuzmics, Christoph, 2002. "Tail-Dependence in Stock-Return Pairs," Economics Series 126, Institute for Advanced Studies.
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