Disaggregating the correlation under bearish and bullish markets: A Quantile-quantile approach

Syed Jawad Hussain Shahzad, Saba Ameer () and Muhammad Shahbaz
Additional contact information
Saba Ameer: COMSATS Institute of Information and Technology, Virtual Campus Islamabad, Pakistan

Economics Bulletin, 2016, vol. 36, issue 4, 2465-2473

Abstract: We disaggregate the correlation between S&P 500, U.S. bond, oil, commodities and gold returns under bearish and bullish market states. In doing so, we apply a novel quantile-on-quantile (QQ) approach, on the monthly data from January 1982 to December 2015, to construct correlation estimates between the quantile of S&P 500 and quantile of other markets. This approach captures the dependence between the distributions of U.S. stock return and other markets and uncovers two nuance features. First, higher dependence of U.S. bond and Gold with U.S. stock market returns is found when the U.S. stock market is bullish (i.e. at upper U.S. return quantiles). Second, higher dependence of U.S. commodities and oil with U.S. stock market returns exists when the U.S. stock market is bearish (i.e. at lower U.S. return quantiles). Finally, the relationship between U.S equities and other investment markets is asymmetric.

Keywords: Stock markets; commodities; quantile regression; risk management (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2016-12-21
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I4-P238.pdf (application/pdf)

Related works:
Working Paper: Disaggregating the correlation under bearish and bullish markets: A Quantile-quantile approach (2016)
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:ebl:ecbull:eb-16-00683

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().