Economic Factors Contributing to Time-Varying Conditional Correlations in Stock Returns
AbstractThis paper attempts to find economic and financial factors contributing to the changing correlations of stock returns. Time-varying correlations were documented in previous studies, but a few attempts have been made to investigate their evolution. Using daily data from the Asia-Pacific region, this paper provides evidence that return correlations are negatively correlated with the distance between the markets. Furthermore, correlations tend to be higher in advanced countries and increase at times of the active trading (e.g., around the Lehman shock). Instead, the level of correlations declines among pairs of countries with less financial integration.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 28391.
Date of creation: 01 Dec 2010
Date of revision:
Conditional correlations; DCC;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-05 (All new papers)
- NEP-IFN-2011-02-05 (International Finance)
- NEP-SEA-2011-02-05 (South East Asia)
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