Quantile dependence between the stock, bond and foreign exchange markets – Evidence from the UK

Hamid Raza and Weiou Wu

The Quarterly Review of Economics and Finance, 2018, vol. 69, issue C, 286-296

Abstract: In the wake of Brexit, this paper aims to provide a measure for the quantile dependence amongst different financial assets – bond, stock, and currency – within the UK market and their cross-border linkages with the European equity market. We implement a nonparametric estimation method for both the tail and quantile dependence parameters on weekly data over the period 1989–2016 using copula. Our results suggest that the contagion effects between stock and currency markets are limited, even under extreme fluctuations. We also find a weak comovement between currency and bond markets, however, evidence of asymmetry is found in the dependence structure, possibly due to the ‘risk-reward’ scenario of international investors. Finally, our results indicate a weak dependence between stock returns and bond yields, possibly due to the low-yielding gilt and the thirst for income, pushing investors to diversify globally into other financial markets.

Keywords: Quantile dependence; Copula; Nonparametric estimation; Asymmetric dependence (search for similar items in EconPapers)
JEL-codes: C22 G12 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976916301053
Full text for ScienceDirect subscribers only

Related works:
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:eee:quaeco:v:69:y:2018:i:c:p:286-296

DOI: 10.1016/j.qref.2018.03.009

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().