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Dynamic Stock Market Covariances in the Eurozone
Connor, Gregory; Suurlaht, Anita
This paper examines the short-term dynamics, macroeconomic sensitivities, and longer-term trends in the variances and covariances of national equity market index daily returns for eleven countries in the Euro currency zone. We modify Colacito, Engle and Ghysel’s Mixed Data Sampling Dynamic Conditional Correlation Garch model to include a new scalar measure for the degree of correlatedness in time-varying correlation matrices. We also explore the robustness of the …ndings with a less model-dependent realized covariance estima- tor. We …nd a secular trend toward higher correlation during our sample period, and signi…cant linkages between macroeconomic and market-wide variables and dynamic correlation. One notable …nding is that average correlation between these markets is lower when their average GDP growth rate is lower or when more of them have negative GDP growth.
Keyword(s): Economics, Finance & Accounting; dynamic conditional correlation; multivariate GARCH; international stock market integration; European Monetary Union
Publication Date:
Type: Other
Peer-Reviewed: No
Institution: Maynooth University
Funder(s): Science Foundation Ireland
Citation(s): Connor, Gregory and Suurlaht, Anita (2012) Dynamic Stock Market Covariances in the Eurozone. NUI Maynooth. (Unpublished)
Publisher(s): NUI Maynooth
File Format(s): application/pdf
Related Link(s):
First Indexed: 2014-09-20 05:03:17 Last Updated: 2017-04-25 18:03:12