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Linkages Among Asset Markets in the United States

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Author Info

  • Parha Deb
  • Salim M. Darbar

Abstract

This paper develops a bivariate GARCH model that allows for time-varying conditional correlations and simultaneous testing of two Granger-causal linkages: the impact of return volatility in a market on intermarket correlation and the impact of return volatility in one market on the volatility of another. Using daily data from stock, bond, currency, and commodity markets in the United States, the paper finds evidence of each form of linkage. Furthermore, the conditional correlations change over time and exhibit considerable persistence. The estimated time-varying conditional correlations provide insight into the nature of the stock market crash of 1987.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/158.

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Length: 25
Date of creation: 01 Nov 1999
Date of revision:
Handle: RePEc:imf:imfwpa:99/158

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Cited by:
  1. Galina Hale & Carlos Arteta, 2007. "Currency crises and foreign credit in emerging markets: credit crunch or demand effect?," Working Paper Series 2007-02, Federal Reserve Bank of San Francisco.
  2. S. Holle & M. Demertzis, 2002. "External Wealth and the Trade Balance: A Time-Series Analysis for the Netherlands," WO Research Memoranda (discontinued) 716, Netherlands Central Bank, Research Department.
  3. Jonathan Heathcote & Fabrizio Perri, 2001. "Financial Globalization and Real Regionalization," Working Papers 01-11, New York University, Leonard N. Stern School of Business, Department of Economics.
  4. Laborde, David & Rey, Serge, 2001. "Transmission internationale de la volatilité des prix d’actifs financiers : les relations entre les marchés français et américains de 1997 à 2000
    [Volatility and cross correlation across ass
    ," MPRA Paper 30284, University Library of Munich, Germany.
  5. Antonia López Villavicencio & Josep Lluís Raymond Bara, 2006. "The short and long-run determinants of the real exchange rate in Mexico," Working Papers wpdea0606, Department of Applied Economics at Universitat Autonoma of Barcelona.
  6. Enrique Alberola & Susana G. Cervero & Humberto Lopez & Angel Ubide, 2000. "Global Equilibrium Exchange Rates: Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework," Econometric Society World Congress 2000 Contributed Papers 0051, Econometric Society.
  7. Antonia López Villavicencio, 2006. "Real equilibrium exchange rates. A panel data approach for advanced and emerging economies," Working Papers wpdea0605, Department of Applied Economics at Universitat Autonoma of Barcelona.

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