Identification of Asset Price Misalignments on Financial Markets With Extreme Value Theory

Narcisa Kadlcakova, Lubos Komarek (), Zlatuse Komarkova () and Michal Hlaváček

Emerging Markets Finance and Trade, 2016, vol. 52, issue 11, 2595-2609

Abstract: This article examines the potential for concurrence of crises and asset price misalignments from equilibrium in the foreign exchange, stock, and government bond markets of three Central European countries and the euro area. Concurrence is understood as the joint occurrence of extreme asset changes and is assessed with a measure of asymptotic tail dependence in the distributions studied. The results reveal a significant potential for the co-alignment of crises in the examined markets. Evidence for co-movements in misalignments from equilibrium is found among all examined stock and exchange rate markets; although it is not apparent in some government bond markets.

Date: 2016
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Working Paper: Identification of Asset Price Misalignments on Financial Markets With Extreme Value Theory (2013)
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DOI: 10.1080/1540496X.2015.1087792

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