High and low frequency correlations in global equity markets

Arbeitspapier

This study models high and low frequency variation in global equity correlations using a comprehensive sample of 43 countries that includes developed and emerging markets, during the period 1995-2008. These two types of variations are modeled following the semi-parametric Factor-Spline-GARCH approach of Rangel and Engle (2008). This framework is extended and modified to incorporate the effect of multiple factors and to address the issue of non-synchronicity in international markets. Our empirical analysis suggests that the slow-moving dynamics of global correlations can be described by the Factor-Spline-GARCH specifications using either weekly or daily data. The analysis shows that the low frequency component of global correlations increased in the current financial turmoil; however, this increase was not equally distributed across countries. The countries that experienced the largest increase in correlations were mainly emerging markets.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 2009-17

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Model Construction and Estimation ; Model Evaluation, Validation, and Selection ; Asset Pricing; Trading Volume; Bond Interest Rates ; International Financial Markets
• Subject: dynamic conditional correlations ; high and low frequency variation ; global markets ; non-synchronicity ; Internationaler Finanzmarkt ; Kapitalanlage ; Kapitaleinkommen ; Statistische Verteilung ; ARCH-Modell ; Industriestaaten ; Schwellenländer

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Engle, Robert ; Rangel, José Gonzalo
• Event: Veröffentlichung
• (who): Banco de México
• (where): Ciudad de México
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/83767
• Last update: 10.03.2025, 11:43 AM CET