IDEAS home Printed from https://ideas.repec.org/a/wsi/ijitdm/v08y2009i04ns0219622009003612.html
   My bibliography  Save this article

A Copula-Based Correlation Measure And Its Application In Chinese Stock Market

Author

Listed:
  • FENGHUA WEN

    (School of Economics Changsha University of Science & Technology Changsha, Hunan Province, 410076, P. R. China)

  • ZHIFENG LIU

    (School of Economics Changsha University of Science & Technology Changsha, Hunan Province, 410076, P. R. China)

Abstract

In this paper, a copula-based correlation measure is proposed to test the interdependence among stochastic variables in terms of copula function. Based on a geometric analysis of copula function, a new derivation method is introduced to derive the Gini correlation coefficient. Meantime theoretical analysis finds that the Gini correlation coefficient tends to overestimate the tail interdependence in the case of stochastic variables clustering at the tails. For this overestimation issue, a fully new correlation coefficient called Co is developed and extended to measure the tail interdependence. Empirical study shows that the new correlation coefficient Co can effectively solve the overestimation issue, which implies that the proposed new correlation coefficient is more suitable to describe the interdependence among stochastic variables than the Gini correlation coefficient.

Suggested Citation

  • Fenghua Wen & Zhifeng Liu, 2009. "A Copula-Based Correlation Measure And Its Application In Chinese Stock Market," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 8(04), pages 787-801.
    • Handle: RePEc:wsi:ijitdm:v:08:y:2009:i:04:n:s0219622009003612
    DOI: 10.1142/S0219622009003612
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219622009003612
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219622009003612?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.

    Citations

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


    Cited by:

    1. Gang-Jin Wang & Chi Xie & Peng Zhang & Feng Han & Shou Chen, 2014. "Dynamics of Foreign Exchange Networks: A Time-Varying Copula Approach," Discrete Dynamics in Nature and Society, Hindawi, vol. 2014, pages 1-11, May.
    2. Yiding Yue & Jinyou Zou, 2014. "The Role of Wealth and Health in Insurance Choice: Bivariate Probit Analysis in China," Mathematical Problems in Engineering, Hindawi, vol. 2014, pages 1-9, March.
    3. Ma, Pengcheng & Li, Daye & Li, Shuo, 2016. "Efficiency and cross-correlation in equity market during global financial crisis: Evidence from China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 444(C), pages 163-176.
    4. Umar, Zaghum & Usman, Muhammad & Choi, Sun-Yong & Rice, John, 2023. "Diversification benefits of NFTs for conventional asset investors: Evidence from CoVaR with higher moments and optimal hedge ratios," Research in International Business and Finance, Elsevier, vol. 65(C).
    5. Nuugulu, Samuel M & Gideon, Frednard & Patidar, Kailash C, 2021. "A robust numerical scheme for a time-fractional Black-Scholes partial differential equation describing stock exchange dynamics," Chaos, Solitons & Fractals, Elsevier, vol. 145(C).

    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:wsi:ijitdm:v:08:y:2009:i:04:n:s0219622009003612. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijitdm/ijitdm.shtml .

    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.