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A DCC-GARCH Model To Estimate the Risk to the Capital Market in Romania

Author

Listed:
  • Acatrinei, Marius

    () (Institute for Economic Forecasting, Romanian Academy)

  • Gorun, Adrian

    (Constantin Brancusi University of Targu Jiu)

  • Marcu, Nicu

    () (University of Craiova)

Abstract

In this paper we propose to study if the standard and asymmetric dynamic conditional correlation (DCC) models, following Cappiello et al. (2006), may capture spillover effects and the degree of interaction with the European capital market using the DAX index as proxy. We found evidence that the asymmetric DCC models perform better than the similar non-asymmetric ones. In the second semester of 2011, increased significant dynamic correlations suggest the presence of volatility spillovers from the main capital equity markets. Although all DCC models can capture contagion, seen as a significant increase in the co-movements of stock index returns, the AGD-DCC model is more sensitive to unexpected changes in returns. The results indicate significant, but not very strong correlation of BET and BETFI indexes with the DAX index in the second semester of 2011.

Suggested Citation

  • Acatrinei, Marius & Gorun, Adrian & Marcu, Nicu, 2013. "A DCC-GARCH Model To Estimate the Risk to the Capital Market in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 136-148, March.
  • Handle: RePEc:rjr:romjef:v::y:2013:i:1:p:136-148
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Murad A.Bein & Gulcay TUNA, 2015. "Volatility Transmission and Dynamic Correlation Analysis between Developed and Emerging European Stock Markets during Sovereign Debt Crisis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 61-80, June.
    2. Saralees Nadarajah & Emmanuel Afuecheta & Stephen Chan, 2015. "GARCH modeling of five popular commodities," Empirical Economics, Springer, vol. 48(4), pages 1691-1712, June.
    3. Adelina-Monica Moraru, 2017. "Risk management on the capital market and use of multi-factorial models for estimating the stocks return," Scientific Papers 0005, Institute of Financial Studies.
    4. Güloğlu, Bülent & Kaya, Pınar & Aydemir, Resul, 2016. "Volatility transmission among Latin American stock markets under structural breaks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 462(C), pages 330-340.

    More about this item

    Keywords

    volatility spillovers; contagion effects; stock return comovem;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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