Dependence structure between the BRICS foreign exchange and stock markets using the dependence-switching copula approach
Aviral Tiwari (),
Yogesh Chauhan and
International Review of Financial Analysis, 2019, vol. 63, issue C, 273-284
We examine the dependence structure between the BRICS stock and foreign exchange markets using a dependence-switching copula model. In particular, we examine dependence and tail dependence for four different market conditions, namely rising stock–appreciating currency, falling stock–depreciating currency, rising stock–depreciating currency and falling stock–appreciating currency. Our results indicate that dependence and tail dependence in the four market conditions are symmetric for all countries except Russia during negative correlation regimes. During positive correlation regimes, dependencies generally asymmetric but tail dependence is symmetric for all countries. The results further suggest the dominance of return chasing effects for India, Brazil and South Africa, and portfolio rebalancing effects for China and Russia most of the time. We further show that the co-dependencies computed using R-vine copulas are best suited to compute the portfolio VaR during the considered time period.
Keywords: BRICS; Dependence-switching copula; Tail dependence; Return chasing; Portfolio rebalancing (search for similar items in EconPapers)
JEL-codes: C58 C63 G11 G14 G15 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:63:y:2019:i:c:p:273-284
Access Statistics for this article
International Review of Financial Analysis is currently edited by B.M. Lucey
More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().