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Assessing Dependence Changes in the Asian Financial Market Returns Using Plots Based on Nonparametric Measures

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  • Param Silvapulle

    ()

  • Xibin Zhang

    ()

Abstract

This paper investigates whether or not there are significant changes in the dependence between the Thai equity market and six Asian markets - namely, Singaporean, Malaysian, Hong Kong, Korean, Indonesian and Taiwanese markets - due to 1997-July financial crisis. If so, this may be an indication that the underlying bivariate joint distributions capturing the dependence between the Thai market and these six markets have changed. We employ the chi-plot proposed by Fisher and Switzer (2001) and the Kendall plot proposed by Genest and Boies (2003) to examine the dependence in these six markets for the pre- and post-1997 financial crisis periods. We find that marginal distributions of all seven markets have notably changed due to this financial crisis, and that the functional forms of the underlying joint distributions generating the dependence in the Korean, Indonesian and Taiwan markets have also changed for the post-crisis period. It appears that the same parametric copula can capture the dependence in the Singapore, Malaysia and Hong Kong markets for both pre- and post-crisis periods, and that only the tail indices of bivariate distributions between the Thai and these three markets have changed. It is interesting to observe that the same conclusions can be drawn using both chi- and Kendall plots.

Suggested Citation

  • Param Silvapulle & Xibin Zhang, 2006. "Assessing Dependence Changes in the Asian Financial Market Returns Using Plots Based on Nonparametric Measures," Monash Econometrics and Business Statistics Working Papers 9/06, Monash University, Department of Econometrics and Business Statistics.
  • Handle: RePEc:msh:ebswps:2006-9
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    File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2006/wp9-06.pdf
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    References listed on IDEAS

    as
    1. Andrew Ang & Geert Bekaert, 2002. "International Asset Allocation With Regime Shifts," Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1137-1187.
    2. Genest C. & Boies J-C., 2003. "Detecting Dependence With Kendall Plots," The American Statistician, American Statistical Association, vol. 57, pages 275-284, November.
    3. Granger, Clive W.J. & Terasvirta, Timo & Patton, Andrew J., 2006. "Common factors in conditional distributions for bivariate time series," Journal of Econometrics, Elsevier, vol. 132(1), pages 43-57, May.
    4. Andrew J. Patton, 2006. "Modelling Asymmetric Exchange Rate Dependence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 527-556, May.
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    Cited by:

    1. Nguyen, Cuong C. & Bhatti, M. Ishaq, 2012. "Copula model dependency between oil prices and stock markets: Evidence from China and Vietnam," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 758-773.

    More about this item

    Keywords

    chi-plot; copula; dependence; Kendall-plot;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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