Modelling Dependence in Latin American Markets Using Copula Functions

Canela Miguel-Angel and Pedreira Eduardo
Additional contact information
Canela Miguel-Angel: Miguel-Angel Canela, Department of Managerial Decision Sciences, IESE Business School, Av. Pearson 21, 08034 Barcelona, Spain. E-mail: mcanela@iese.edu
Pedreira Eduardo: Eduardo Pedreira, ‘la Caixa’ Research Department, Av. Diagonal 629, 08028 Barcelona, Spain. E-mail: epedreira@lacaixa.es

Journal of Emerging Market Finance, 2012, vol. 11, issue 3, 231-270

Abstract: Two important issues in the analysis of association among financial markets are the degree of dependence and the underlying shape commanding the cross-market dependencies, so that any model used to describe this association must cope with both the issues. In the study presented in this article, we approach the modelling of dependence in two stages. The first stage is based on modelling the dependence between the returns of two assets by means of a single Archimedean copula, whereas the second one takes advantage of the mixture between copulas to gain the necessary flexibility to capture different tail dependence patterns. Both stages have been followed in modelling the dependence among the daily returns of seven Latin American country indices, a regional index and a worldwide index. Our findings have important implications for portfolio risk management. JEL Classification: G11, G15

Keywords: Emerging markets; tail dependence; copulas; mixture copulas; dependence structure (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/0972652712466493 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:11:y:2012:i:3:p:231-270

DOI: 10.1177/0972652712466493

Access Statistics for this article

More articles in Journal of Emerging Market Finance from Institute for Financial Management and Research
Bibliographic data for series maintained by SAGE Publications ().