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Dynamic conditional relationships between developed and emerging markets

Wonho Song (), Sung Y. Park () and Doojin Ryu

Physica A: Statistical Mechanics and its Applications, 2018, vol. 507, issue C, 534-543

Abstract: This study examines the dynamic conditional correlations between the US and Korean financial markets and identifies the determinants of those correlations using the VAR-DCC-MGARCH model. We find that the Global Financial Crisis (GFC) affects both countries. Although the shocks to the Korean market before the GFC are not shared by the US market, those to the US market after the GFC are shared by the Korean market. We also examine the determinants of the dynamic conditional relations between the US and Korean markets using domestic macroeconomic variables and US/Korean financial variables. The results indicate that the US financial variables are more significant than domestic macroeconomic variables and that they have become increasingly important over time.

Keywords: Financial market; Global financial crisis; Information spillover; Macroeconomic variables; Overseas shock; VAR-DCC-MGARCH (search for similar items in EconPapers)
JEL-codes: C22 E44 F36 G17 G19 (search for similar items in EconPapers)
Date: 2018
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