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A DCC-GARCH Model To Estimate the Risk to the Capital Market in Romania

Marius Acatrinei (), Adrian Gorun and Nicu Marcu ()
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Adrian Gorun: Constantin Brancusi University of Targu Jiu

Journal for Economic Forecasting, 2013, issue 1, 136-148

Abstract: In this paper we propose to study if the standard and asymmetric dynamic conditional correlation (DCC) models, following Cappiello et al. (2006), may capture spillover effects and the degree of interaction with the European capital market using the DAX index as proxy. We found evidence that the asymmetric DCC models perform better than the similar non-asymmetric ones. In the second semester of 2011, increased significant dynamic correlations suggest the presence of volatility spillovers from the main capital equity markets. Although all DCC models can capture contagion, seen as a significant increase in the co-movements of stock index returns, the AGD-DCC model is more sensitive to unexpected changes in returns. The results indicate significant, but not very strong correlation of BET and BETFI indexes with the DAX index in the second semester of 2011.

Keywords: volatility spillovers; contagion effects; stock return comovem (search for similar items in EconPapers)
JEL-codes: G01 G14 G32 (search for similar items in EconPapers)
Date: 2013
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