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Cross-market index with Factor-DCC

Sofiane Aboura () and Julien Chevallier

Economic Modelling, 2014, vol. 40, issue C, 158-166

Abstract: This paper proposes a new empirical methodology for computing a cross-market index – coined CMI – based on the Factor DCC-model. This approach solves both problems of treating high-dimensional data and estimating time-varying conditional correlations. We provide an application to a multi-asset market data composed of equities, bonds, foreign exchange rates and commodities during 1983–2013. This new methodology may be attractive to asset managers, since it provides a simple way of constructing passive portfolios customized on any asset class.

Keywords: Cross-market index; Factor-DCC; Asset management (search for similar items in EconPapers)
JEL-codes: C32 F15 G01 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.econmod.2014.04.001

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