Final published version
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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Multivariate FIAPARCH modelling of financial markets with dynamic correlations in times of crisis
AU - Karanasos, Menelaos
AU - Yfanti, Stavroula
AU - Karoglou, Michail
PY - 2016/5
Y1 - 2016/5
N2 - This paper applies the vector AR-DCC-FIAPARCH model to eight national stock market 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.
AB - This paper applies the vector AR-DCC-FIAPARCH model to eight national stock market 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.
KW - Contagion effects
KW - Dynamic conditional correlation
KW - Financial crisis
KW - Long memory
KW - Multivariate
KW - GARCH
KW - Structural breaks
U2 - 10.1016/j.irfa.2014.09.002
DO - 10.1016/j.irfa.2014.09.002
M3 - Journal article
VL - 45
SP - 332
EP - 349
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
SN - 1057-5219
ER -