Economic Factors Contributing to Time-Varying Conditional Correlations in Stock Returns

Jun Nagayasu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper attempts to find economic and financial factors contributing to the changing correlations of stock returns. Time-varying correlations were documented in previous studies, but a few attempts have been made to investigate their evolution. Using daily data from the Asia-Pacific region, this paper provides evidence that return correlations are negatively correlated with the distance between the markets. Furthermore, correlations tend to be higher in advanced countries and increase at times of the active trading (e.g., around the Lehman shock). Instead, the level of correlations declines among pairs of countries with less financial integration.

Keywords: Conditional correlations; DCC (search for similar items in EconPapers)
JEL-codes: F36 G15 (search for similar items in EconPapers)
Date: 2010-12-01
New Economics Papers: this item is included in nep-ifn and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28391

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