The instability of the correlation structure of the S&P 500
Using weekly returns of S&P 500 constituents, we study the time-varying correlation structure during the period of 2006 to mid-2011. Contrary to most of the previous correlation studies of many assets, we do not use rolling correlations but the DCC MV-GARCH model with the MacGyver strategy proposed by Engle (2009). We find empirical evidence that the correlation structure tends to change significantly during the periods of high volatility and market downturns.
|Date of creation:||17 Oct 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Engle, Robert F & Sheppard, Kevin K, 2001.
"Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH,"
University of California at San Diego, Economics Working Paper Series
qt5s2218dp, Department of Economics, UC San Diego.
- Robert F. Engle & Kevin Sheppard, 2001. "Theoretical and Empirical properties of Dynamic Conditional Correlation Multivariate GARCH," NBER Working Papers 8554, National Bureau of Economic Research, Inc.
- Tse, Chi K. & Liu, Jing & Lau, Francis C.M., 2010. "A network perspective of the stock market," Journal of Empirical Finance, Elsevier, vol. 17(4), pages 659-667, September.
- Junsoo Lee & Mark C. Strazicich, 2004.
"Minimum LM Unit Root Test with One Structural Break,"
04-17, Department of Economics, Appalachian State University.
- Junsoo Lee & Mark C. Strazicich, 2013. "Minimum LM unit root test with one structural break," Economics Bulletin, AccessEcon, vol. 33(4), pages 2483-2492.
- Tom Doan, . "LSUNIT: RATS procedure to implement Lee-Strazicich unit root tests with one or more structural breaks," Statistical Software Components RTS00112, Boston College Department of Economics.
- Garman, Mark B & Klass, Michael J, 1980. "On the Estimation of Security Price Volatilities from Historical Data," The Journal of Business, University of Chicago Press, vol. 53(1), pages 67-78, January.
- Liang Ding & Hiroyoki Miyake & Hao Zou, 2011. "Asymmetric correlations in equity returns: a fundamental-based explanation," Applied Financial Economics, Taylor & Francis Journals, vol. 21(6), pages 389-399.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:34160. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.