IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v23y2013i6p475-481.html
   My bibliography  Save this article

An asymmetric DCC analysis of correlations among bank CDS indices

Author

Listed:
  • Go Tamakoshi
  • Shigeyuki Hamori

Abstract

This study explores the time-varying correlations among the bank industry Credit Default Swap (CDS) indices for the EU, the UK and the US, using the asymmetric Dynamic Conditional Correlation (DCC) model developed by Cappiello et al . (2006). The main findings of the study include: (i) The correlations between each pair of bank CDS indices vary substantially over time. (ii) There is evidence of asymmetric dynamic correlations between the EU and the UK bank CDS indices. The correlations between them tend to be higher when responding to joint downward shocks. (iii) The conditional correlations between the US bank CDS and the UK and the EU bank CDS, respectively, exhibited significant drops immediately after the collapse of Lehman Brothers during the global financial crisis. (iv) The sovereign debt crisis dummy in Autoregressive (AR) models, applied to the estimated DCCs, is significantly positive for the UK and US bank CDSs, as shown by the increased correlations after the onset of the debt crisis.

Suggested Citation

  • Go Tamakoshi & Shigeyuki Hamori, 2013. "An asymmetric DCC analysis of correlations among bank CDS indices," Applied Financial Economics, Taylor & Francis Journals, vol. 23(6), pages 475-481, March.
    • Handle: RePEc:taf:apfiec:v:23:y:2013:i:6:p:475-481
    DOI: 10.1080/09603107.2012.727973
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09603107.2012.727973
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/09603107.2012.727973?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    2. Lorenzo Cappiello & Robert F. Engle & Kevin Sheppard, 2006. "Asymmetric Dynamics in the Correlations of Global Equity and Bond Returns," Journal of Financial Econometrics, Oxford University Press, vol. 4(4), pages 537-572.
    3. Matthew Yiu & Wai-Yip Alex Ho & Daniel Choi, 2010. "Dynamic correlation analysis of financial contagion in Asian markets in global financial turmoil," Applied Financial Economics, Taylor & Francis Journals, vol. 20(4), pages 345-354.
    4. Eichengreen, Barry & Mody, Ashoka & Nedeljkovic, Milan & Sarno, Lucio, 2012. "How the Subprime Crisis went global: Evidence from bank credit default swap spreads," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1299-1318.
    5. Toyoshima, Yuki & Tamakoshi, Go & Hamori, Shigeyuki, 2012. "Asymmetric dynamics in correlations of treasury and swap markets: Evidence from the US market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 381-394.
    6. Dooley, Michael & Hutchison, Michael, 2009. "Transmission of the U.S. subprime crisis to emerging markets: Evidence on the decoupling-recoupling hypothesis," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1331-1349, December.
    7. Matthew S. Yiu & Wai-Yip Alex Ho & Lu Jin, 2010. "Dynamic Correlation Analysis of Financial Spillover to Asian and Latin American Markets in Global Financial Turmoil," Working Papers 1001, Hong Kong Monetary Authority.
    8. Vance L. Martin & Mardi Dungey, 2007. "Unravelling financial market linkages during crises," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 89-119.
    9. Wang, Ping & Moore, Tomoe, 2012. "The integration of the credit default swap markets during the US subprime crisis: Dynamic correlation analysis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 1-15.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiao Jing Cai & Shuairu Tian & Shigeyuki Hamori, 2017. "Stock Market Integration in China: Evidence from the Asymmetric DCC Model and Copula Approach," Applied Economics and Finance, Redfame publishing, vol. 4(2), pages 1-10, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Toyoshima, Yuki & Hamori, Shigeyuki, 2013. "Asymmetric dynamics in stock market correlations: Evidence from Japan and Singapore," Journal of Asian Economics, Elsevier, vol. 24(C), pages 117-123.
    2. Lu Yang & Shigeyuki Hamori, 2013. "EU Accession, Financial Integration, and Contagion Effects: Dynamic Correlation Analysis of CEEC-3 Bond Markets," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 20(2), pages 179-189, October.
    3. Ahmad, Wasim & Sehgal, Sanjay & Bhanumurthy, N.R., 2013. "Eurozone crisis and BRIICKS stock markets: Contagion or market interdependence?," Economic Modelling, Elsevier, vol. 33(C), pages 209-225.
    4. Alexakis, Christos & Pappas, Vasileios, 2018. "Sectoral dynamics of financial contagion in Europe - The cases of the recent crises episodes," Economic Modelling, Elsevier, vol. 73(C), pages 222-239.
    5. repec:ipg:wpaper:201417 is not listed on IDEAS
    6. Pragidis, I.C. & Aielli, G.P. & Chionis, D. & Schizas, P., 2015. "Contagion effects during financial crisis: Evidence from the Greek sovereign bonds market," Journal of Financial Stability, Elsevier, vol. 18(C), pages 127-138.
    7. Sercan Demiralay & Veysel Ulusoy, 2017. "How Has the Behavior of Cross-Market Correlations Altered During Financial and Debt Crises?," Manchester School, University of Manchester, vol. 85(6), pages 765-794, December.
    8. Mpoha, Salifya & Bonga-Bonga, Lumengo, 2021. "Spillover effects from China and the US to global emerging markets: a dynamic analysis," MPRA Paper 109349, University Library of Munich, Germany.
    9. Toyoshima, Yuki & Tamakoshi, Go & Hamori, Shigeyuki, 2012. "Asymmetric dynamics in correlations of treasury and swap markets: Evidence from the US market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 381-394.
    10. Irfan Akbar Kazi & Mohamed Mehanaoui & Farhan Akbar, 2014. "The shift-contagion effect of global financial crisis and the European debt crisis on OECD Countries," Working Papers 2014-128, Department of Research, Ipag Business School.
    11. Tamakoshi, Go & Hamori, Shigeyuki, 2014. "Co-movements among major European exchange rates: A multivariate time-varying asymmetric approach," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 105-113.
    12. repec:dgr:rugsom:14029-eef is not listed on IDEAS
    13. Irfan Akbar Kazi & Hakimzadi Wagan, 2014. "Are emerging markets exposed to contagion from U.S.: Evidence from stock and sovereign bond markets," Working Papers 2014-58, Department of Research, Ipag Business School.
    14. Priya Malhotra & Pankaj Sinha, 2024. "Balanced Funds in India Amid COVID-19 Crisis: Spreader of Financial Contagion?," IIM Kozhikode Society & Management Review, , vol. 13(1), pages 7-24, January.
    15. repec:ipg:wpaper:2014-058 is not listed on IDEAS
    16. Tamakoshi, Go & Hamori, Shigeyuki, 2014. "Spillovers among CDS indexes in the US financial sector," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 104-113.
    17. Suzanne Salloy & Irfan Akbar Kazi, 2013. "Contagion effect due to Lehman Brothers’ bankruptcy and the global financial crisis: From the perspective of the Credit Default Swaps’ G14 dealers," Erudite Working Paper 2013-02, Erudite.
    18. Kenourgios, Dimitris & Asteriou, Dimitrios & Samitas, Aristeidis, 2013. "Testing for asymmetric financial contagion: New evidence from the Asian crisis," The Journal of Economic Asymmetries, Elsevier, vol. 10(2), pages 129-137.
    19. Tiwari, Aviral Kumar & Mutascu, Mihai Ioan & Albulescu, Claudiu Tiberiu, 2016. "Continuous wavelet transform and rolling correlation of European stock markets," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 237-256.
    20. Kim, Bong-Han & Kim, Hyeongwoo & Lee, Bong-Soo, 2015. "Spillover effects of the U.S. financial crisis on financial markets in emerging Asian countries," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 192-210.
    21. Riadh Abed & Amna Zardoub, 2019. "On the co-movements among gold and other financial markets: a multivariate time-varying asymmetric approach," International Economics and Economic Policy, Springer, vol. 16(4), pages 701-719, October.
    22. Kang, Sang Hoon & Uddin, Gazi Salah & Troster, Victor & Yoon, Seong-Min, 2019. "Directional spillover effects between ASEAN and world stock markets," Journal of Multinational Financial Management, Elsevier, vol. 52.
    23. Yang (Greg) Hou & Mark Holmes, 2020. "Do higher order moments of return distribution provide better decisions in minimum-variance hedging? Evidence from US stock index futures," Australian Journal of Management, Australian School of Business, vol. 45(2), pages 240-265, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:23:y:2013:i:6:p:475-481. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.