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A time-varying copula approach for modelling dependency: New evidence from commodity and stock markets

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  • Charfeddine, Lanouar
  • Benlagha, Noureddine

Abstract

This paper examines the time-varying conditional dependency between commodity markets and stock markets by applying the rolling-sample technique on the dependence parameter of copula. The dataset consists of the closing prices of twelve commodities and the SP500, CAC40, DAX30 and FTSE100 indices during the period from July 7, 1992 to February 17, 2015. To date precisely the breakpoints in the dynamics of the copula parameter of dependence, we employ Bai and Perron’s (BP, 1998, 2003) structural break-testing procedure.

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  • Charfeddine, Lanouar & Benlagha, Noureddine, 2016. "A time-varying copula approach for modelling dependency: New evidence from commodity and stock markets," Journal of Multinational Financial Management, Elsevier, vol. 37, pages 168-189.
  • Handle: RePEc:eee:mulfin:v:37-38:y:2016:i::p:168-189
    DOI: 10.1016/j.mulfin.2016.10.003
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    Keywords

    Time varying dependence; Copula; Breaks; Commodity; Stock market;

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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