Arbeitspapier
Dependence of stock returns in bull and bear markets
Pearson's correlation coefficient is typically used for measuring the dependence structure of stock returns. Nevertheless, it has many shortcomings often documented in the literature. We suggest to use a conditional version of Spearman's rho as an alternative dependence measure. Our approach is purely nonparametric and we avoid any kind of model misspecification. We derive hypothesis tests for the conditional Spearman's rho in bull andbearmarkets and verify the tests by Monte Carlo simulation.Further, we study the daily returns of stocks contained in the German stock index DAX 30. We find some significant differences in dependence of stock returns in bull and bear markets. On the other hand the differences are not so strong as one might expect.
- Language
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Englisch
- Bibliographic citation
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Series: Discussion Papers in Statistics and Econometrics ; No. 9/07
- Classification
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Wirtschaft
Semiparametric and Nonparametric Methods: General
Hypothesis Testing: General
- Subject
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bear market
bootstrapping
bull market
conditional Spearman's rho
copulas
Monte Carlo simulation
stock returns
- Event
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Geistige Schöpfung
- (who)
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Dobrić, Jadran
Frahm, Gabriel
Schmid, Friedrich
- Event
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Veröffentlichung
- (who)
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University of Cologne, Seminar of Economic and Social Statistics
- (where)
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Cologne
- (when)
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2007
- Handle
- Last update
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10.03.2025, 11:41 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
- Dobrić, Jadran
- Frahm, Gabriel
- Schmid, Friedrich
- University of Cologne, Seminar of Economic and Social Statistics
Time of origin
- 2007