Modeling Time-Varying Correlations in Volatility Between BRICS and Commodity Markets
Sang Hoon Kang,
Ron McIver and
Seong-Min Yoon ()
Emerging Markets Finance and Trade, 2016, vol. 52, issue 7, 1698-1723
This article investigates the asymmetric and long memory volatility properties and dynamic conditional correlations (DCCs) between Brazilian, Russian, Indian, Chinese, and South African (BRICS) stock markets and commodity (gold and oil) futures markets, using the trivariate DCC-fractionally integrated asymmetric power autoregressive conditional heteroskedasticity (FIAPARCH) model. We identify significant asymmetric and long memory volatility properties and DCCs for pairs of BRICS stock and commodity markets, and variability in DCCs and Markov Switching regimes during economic and financial crises. Finally, we analyze optimal portfolio weights and time-varying hedge ratios, demonstrating the importance of overweighting optimal portfolios between BRICS stock and commodity assets.
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:52:y:2016:i:7:p:1698-1723
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