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Title: Multivariate FIAPARCH modelling of financial markets with dynamic correlations in times of crisis
Authors: Karanasos, M
Yfanti, S
Karoglou, M
Keywords: AR-DCC-FIAPARCH model;Stockmarket indices;Asymmetric volatility;Financial crisis
Issue Date: 2015
Publisher: Elsevier
Citation: International Review of Financial Analysis, 2015, Forthcoming
Abstract: This paper applies the vector AR-DCC-FIAPARCH model to eight national stockmarket indices' daily returns from 1988 to 2010, taking into account the structural breaks of each time series linked to the Asian and the recent Global financial crisis. We find significant cross effects, as well as long range volatility dependence, asymmetric volatility response to positive and negative shocks, and the power of returns that best fits the volatility pattern. One of the main findings of the model analysis is the higher dynamic correlations of the stock markets after a crisis event, which means increased contagion effects between the markets. The fact that during the crisis the conditional correlations remain on a high level indicates a continuous herding behaviour during these periods of increased market volatility. Finally, during the recent Global financial crisis the correlations remain on a much higher level than during the Asian financial crisis. © 2014 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license.
Description: This article has been made available through the Brunel Open Access Publishing Fund.
ISSN: 1057-5219
Appears in Collections:Brunel OA Publishing Fund
Dept of Economics and Finance Research Papers

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