Seminar on Probability and Statistics

Seminar information archive ~03/28Next seminarFuture seminars 03/29~

Organizer(s) Nakahiro Yoshida, Teppei Ogihara, Yuta Koike

2007/05/23

16:20-17:30   Room #122 (Graduate School of Math. Sci. Bldg.)
沖本 竜義 (横浜国立大学経済学部・大学院国際社会科学研究科)
New Evidence of Asymmetric Dependence Structures in International Equity Markets
[ Abstract ]
A number of recent studies found two asymmetries in dependence structures in international equity markets; specifically, dependence tends to be high in (1) highly volatile markets and (2) bear markets. In this paper, a further investigation on asymmetric dependence structures in international equity markets is performed under the use of the Markov switching model and copula theory. Combining these two theories enables us to model dependence structures with sufficient flexibility. Using this flexible framework we indeed found that there are two distinct regimes in the US-UK market. We also showed that, for the US-UK market, the bear regime is better described by an asymmetric copula with lower tail dependence with clear rejection of the Markov switching multivariate Normal model. In addition, we showed ignorance of this further asymmetry in bear markets is very costly for risk management. Lastly, we conducted similar analysis for other G7 countries, where we found other c ases where the use of a Markov switching multivariate Normal model would be inappropriate.
[ Reference URL ]
https://www.ms.u-tokyo.ac.jp/~kengok/statseminar/2007/00.html