Arbeitspapier
Tail-dependence in stock-return pairs
The empirical joint distribution of return-pairs on stock indices displays high tail-dependence in the lower tail and low tail-dependence in the upper tail. The presence of tail-dependence is not compatible with the assumption of (conditional) joint normality. The presence of asymmetric-tail dependence is not compatible with the assumption of a joint student -t distribution. A general test for one dependence structure versus another via the profilelikelihood is described and employed in a bivariate GARCH model, where the joint distribution of the disturbances is split into its marginals and its copula. The copula used is such that it allows for the presence of lower tail-dependence and for asymmetric taildependence, and that it encompasses the normal or t-copula. The model is estimated using bivariate data on a set of European stock indices. We find that the assumption of normal or student-t dependence is easily rejected in favour of an asymmetrically tail-dependent distribution.
- Language
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Englisch
- Bibliographic citation
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Series: Reihe Ökonomie / Economics Series ; No. 126
- Classification
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Wirtschaft
Hypothesis Testing: General
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Model Evaluation, Validation, and Selection
Model Construction and Estimation
International Financial Markets
- Subject
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value-at-risk
copula
non-normal bivariate GARCH
asymmetric dependence
profile likelihood-ratio test
Kapitalertrag
Aktienindex
Internationaler Preiszusammenhang
ARCH-Modell
Schätzung
Deutschland
USA
Risikomaß
Statistische Verteilung
- Event
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Geistige Schöpfung
- (who)
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Fortin, Ines
Kuzmics, Christoph
- Event
-
Veröffentlichung
- (who)
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Institute for Advanced Studies (IHS)
- (where)
-
Vienna
- (when)
-
2002
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Fortin, Ines
- Kuzmics, Christoph
- Institute for Advanced Studies (IHS)
Time of origin
- 2002
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