Comovements of different asset classes during market stress
AbstractThis paper assesses the linkages between the most important U.S. financial asset classes (stocks, bonds, T-bills and gold) during periods of financial turmoil. Our results have potentially important implications for strategic asset allocation and pension fund management. We use multivariate extreme value theory to estimate the exposure of one asset class to extreme movements in the other asset classes. By applying structural break tests to those measures we study to what extent linkages in extreme asset returns and volatilities are changing over time. Univariate results andch bivariate comovement results exhibit significant breaks in the 1970s and 1980s corresponding to the turbulent times of e.g. the oil shocks, Volckerâ€™s presidency of the Fed or the stock market crash of 1987.
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Bibliographic InfoPaper provided by Utrecht School of Economics in its series Working Papers with number 09-09.
Length: 49 pages
Date of creation: 2009
Date of revision:
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Other versions of this item:
- Jan Piplack & Stefan Straetmans, 2010. "Comovements Of Different Asset Classes During Market Stress," Pacific Economic Review, Wiley Blackwell, vol. 15(3), pages 385-400, 08.
- G01 - Financial Economics - - General - - - Financial Crises
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-23 (All new papers)
- NEP-FMK-2009-05-23 (Financial Markets)
- NEP-RMG-2009-05-23 (Risk Management)
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- Jessica James & Kristjan Kasikov & Kerry-Ann Edwards, 2012. "The end of diversification," Quantitative Finance, Taylor & Francis Journals, vol. 12(11), pages 1629-1636, November.
- Chan, Kam Fong & Treepongkaruna, Sirimon & Brooks, Robert & Gray, Stephen, 2011. "Asset market linkages: Evidence from financial, commodity and real estate assets," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1415-1426, June.
- Franz Fuerst & Pat McAllister & Petros Sivitanides, 2011. "Flight to Quality? An Investigation of the Attributes of Sold Properties in Hot and Cold Markets," Real Estate & Planning Working Papers rep-wp2011-04, Henley Business School, Reading University.
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