English, Article, Journal or magazine article edition: Correlation Structure of International Equity Markets During Extremely Volatile Periods François, LONGIN; Bruno, SOLNIK

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/23046
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Correlation Structure of International Equity Markets During Extremely Volatile Periods
Author
  • François, LONGIN
  • Bruno, SOLNIK
Physical Description
  • preprint
Notes
  • Correlation in international equity returns is unstable over time. It has been suggested that the international correlation of large stock returns, especially negative ones, differs from that of usual returns. It is in periods of extreme negative returns that the benefits of international risk diversification are most desired and that the question of international correlation is most relevant to risk-averse agents. If return distributions are not multivariate normal, the usual standard deviation and correlation of returns do not provide sufficient information. Additional information can be gained by focusing directly on the properties of extreme returns. While the interest in stock market crashes and booms is large, no study has specifically focused on the correlation between large price movements. A major econometric issue is to specify the multivariate distribution of extreme returns implied by a given distribution of returns. In this paper, we work directly on large returns and study the dependence structure of international equity markets during extremely volatile periods. We use the results of extreme value theory to model the multivariate distribution of large returns, using monthly data from January 1959 to December 1996 for the five largest stock markets. We find that the correlation of large positive returns are not inconsistent with the assumption of multivariate normality. However, the correlation of large negative returns is much greater than expected, suggesting that the benefits of international risk reduction in extremely volatile periods have been overstated.
  • international equity market; volatility; correlation; extreme value theory
  • RePEc:ebg:heccah:0646
Language
  • English
Contributed by
OAIster

Get this edition

Other links

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment