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Does Correlation between Stock Returns Really Increase during Turbulent Period?

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  • François Chesnay
  • Eric Jondeau

Abstract

Correlations between international equity markets are often claimed to increase during periods of high volatility, therefore the benefits of international diversification are reduced when they are most needed, i.e. during crises. In this paper, we investigate the relationship between internatioanl correlation and stock-market turbulence.

Suggested Citation

  • François Chesnay & Eric Jondeau, 2000. "Does Correlation between Stock Returns Really Increase during Turbulent Period?," Working papers 73, Banque de France.
    • Handle: RePEc:bfr:banfra:73
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    More about this item

    Keywords

    Stock returns; International correlation; Markov-switching model.;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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