Global Risk Evolution and Diversification: a Copula-DCC-GARCH Model Approach

Marcelo Righi () and Paulo Sergio Ceretta ()

Brazilian Review of Finance, 2012, vol. 10, issue 4, 529-550

Abstract: In this paper we estimate a dynamic portfolio composed by the U.S., German, British, Brazilian, Hong Kong and Australian markets, the period considered started on September 2001 and finished in September 2011. We ran the Copula-DCC-GARCH model on the daily returns conditional covariance matrix. The results allow us to conclude that there were changes in portfolio composition, occasioned by modifications in volatility and dependence between markets. The dynamic approach significantly reduced the portfolio risk if compared to the traditional static approach, especially in turbulent periods. Furthermore, we verified that the estimated copula model outperformed the conventional DCC model for the sample studied.

Keywords: Dynamic Portfolio; Risk Management; Copulas; Multivariate GARCH (search for similar items in EconPapers)
JEL-codes: C32 C61 F37 G11 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:10:y:2012:i:4:p:529-550

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